FDIC Study of Bank Overdraft Programs

Overdrafts, bank to allow its depositors within the limits agreed upon in advance, deposits moneys over a loan form a credit loan. Broad concept including financial overdraft overdraft, that the financial sector after the completion of the financial savings spent, within the stipulated limits continue to issue the check, the money from the bank advances. Depositors should pay interest on overdraft loans, and the obligation to repay at any time.

FDIC Study
of Bank
Overdraft
Programs
Federal Deposit
Insurance Corporation
November 2008
Executive Summary
In 2006, the Federal Deposit Insurance Corporation (FDIC) initiated a two-part study to gather empiri-
cal data on the types, characteristics, and use of overdraft programs operated by FDIC-supervised banks.
The study was undertaken in response to the recent rapid growth in the use of automated overdraft
programs, defined as programs in which the bank honors a customer’s overdraft obligations using stan-
dardized procedures to determine whether the nonsufficient fund (NSF) transaction qualifies for over-
draft coverage. Little empirical data have been available on these programs, their features, their
managing practices, the fees imposed, and consumer usage patterns.
Data and information for the FDIC’s study were gathered through a survey of a sample of institutions
representing 1,171 FDIC-supervised banks, and a separate data request of customer account and tran-
saction-level data from a smaller set of 39 institutions.1 The two-part study was designed to obtain the
following types of information related to overdraft programs: characteristics, features, and fees of over-
draft programs; transaction-processing policies; marketing and disclosure practices; internal controls and
monitoring practices; the role of vendors and third parties in overdraft program implementation; and
NSF-related fee income and growth. The customer account and transaction-level data collection was
designed to gather information on the provision of overdraft services on customer accounts, the occur-
rence of NSF activity covered under automated overdraft programs, and the characteristics of customer
accounts that tend to incur the highest volume of overdraft fees. It was also designed to identify specific
aspects of overdraft program use that may be appropriate for more rigorous quantitative inquiry.
The FDIC believes that objective information on these programs will help policymakers make better-
informed policy decisions and will help the public better understand the features and costs related to
automated overdraft programs. The study results also will help the banking industry develop more effec-
tive overdraft programs to better serve consumers.
This report provides key study findings pertaining to the growing provision of automated overdraft
programs, enrollment practices, credit limits and fees, marketing and disclosure practices, transaction
processing, and NSF-related revenues. Results from the account and transaction-level data collection are
also included in this report based on the data received from the 39 banks. These latter results suggest
areas that may benefit from further study.
Key findings from the survey of 462 FDIC-supervised banks are as follows:
1. The majority (86.0 percent) of banks operated at least one formal overdraft program—either
automated, linked accounts, or lines of credit (LOC).2 Large banks (defined as those with at least
$1 billion in assets) tended to offer a fuller menu of overdraft programs. The share of all banks offer-
ing automated overdraft programs was 40.5 percent, but large banks were also significantly more
likely to operate automated overdraft programs (76.9 percent), suggesting that a significant share of
customer transaction accounts operated under automated overdraft programs.
1
The study population was 1,171 FDIC-supervised institutions scheduled for on-site examinations from May through December
2007 and FDIC-supervised institutions with at least $5 billion in assets. The survey was administered to a stratified, random sample
of 462 institutions from the study population. The 39 banks from which transaction data were received were a nonrandom subset
of the 462 banks surveyed; therefore, the results are not generalizable beyond the 39-bank sample. See Section II, Methodology,
for a more detailed discussion of the study methodology.
2
Automated overdraft programs are usually a computerized program by which the bank honors a customer’s overdraft obliga-
tions using standardized procedures or a matrix to determine whether the NSF occurrence qualifies for the overdraft coverage.
Linked transfer accounts (linked-accounts) are defined as a contractual agreement between a bank and a customer, linking the
customer’s transaction account with other accounts within the bank, including savings and credit card accounts. Overdraft lines
of credit (LOCs) are contractual agreements between a bank and a customer stating that the bank will lend up to a specified
amount over a defined period to cover overdraft items.
November 2008
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 ii
Executive Summary
2. The number of FDIC-supervised institutions providing automated programs has grown rapidly over
the past several years. Most banks (69.4 percent) initiated their automated overdraft programs after
2001. Large banks were more likely (55.4 percent) to have had an automated overdraft program in
place in 2001.
3. Most banks (75.1 percent) automatically enrolled customers in automated overdraft programs,
although customers were usually permitted to affirmatively opt out of the program. Survey
comments indicated that in some cases, customers were not given the choice to opt in or out of the
automated program.
4. By contrast, almost all banks (94.7 percent) treated linked-account programs as opt-in programs,
requiring that customers affirmatively request to have accounts linked. In addition, customers have
to apply and qualify for an overdraft LOC program, so these programs typically operate on an opt-in
basis.
5. Most banks (73.0 percent) established credit limits for automated overdraft customers in written
policies, consistent with the bank’s lending program. Automated overdraft credit limits stipulated in
these policies ranged from $85 to $10,000, and the median credit limit was $500.
6. Automated overdraft usage fees assessed by banks ranged from $10 to $38, and the median fee
assessed was $27. About one-fourth of the surveyed banks (24.6 percent) also assessed additional
fees on accounts that remained in negative balance status in the form of flat fees or interest charged
on a percentage basis.
7. Fees assessed for linked-account and overdraft LOC programs were typically lower than for auto-
mated overdraft programs. Almost half of the banks with linked-account programs (48.9 percent)
reported charging no explicit fees for the service. The most common fee associated with linked-
account programs was a transfer fee; where charged, the median transfer fee was $5. The primary
cost associated with overdraft LOC programs was the interest charged on funds advanced, usually
accruing at an annual percentage rate (APR) of around 18 percent.
8. The majority (81.0 percent) of banks operating automated programs allowed overdrafts to take place
at automated teller machines (ATMs) and point-of-sale (POS)/debit transactions. However, most
banks whose automated overdraft programs covered ATM and POS/debit transactions informed
customers of an NSF only after the transaction had been completed (88.8 percent of banks for
POS/debit transactions and 70.7 percent of banks for ATM transactions). A minority of banks
(7.9 percent for POS/debit and 23.5 percent for ATMs) did inform consumers that funds were insuf-
ficient before transactions were completed at these locations, offering the customers an opportunity
to cancel the NSF transaction and avoid a fee.
9. A significant share of banks (24.7 percent of all surveyed banks and 53.7 percent of large banks)
batched processed overdraft transactions by size, from largest to smallest, which can increase the
number of overdrafts.
10. More than half of banks with automated overdraft programs (54.2 percent) reported that they relied
on a third-party vendor to implement or manage the program. Small banks (those with less than
$250 million in assets) were more likely to rely on vendors and third parties for automated overdraft
program implementation and management. Most banks using vendors to manage their automated
overdraft programs (70.6 percent) also reported that they paid third-party vendors a percentage of
the fees generated by the program, typically 10 to 20 percent of additional fees generated.
11. The banks earned an estimated $1.97 billion in NSF-related fees in 2006, representing 74 percent
of the $2.66 billion in service charges on deposit accounts reported by these banks in their Reports
of Conditions and Income (Call Reports).3 Total NSF-related fee income accounted for roughly
3
Banks were asked to report annual NSF-related fee income associated with the processing of all NSF transactions. Fee
income data cited are estimates for study population banks only and do not represent estimates for other segments of the banking
industry.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 iii
Executive Summary
6 percent of the total net operating revenues earned by the banks. Banks operating automated over-
draft programs earned $1.77 billion in NSF fees in 2006, accounting for 90 percent of total NSF-
related fee income earned by the entire study population.
12. Banks that operated automated overdraft programs had higher NSF-related fee income (measured as
a share of operating revenues) compared with other banks. In addition, banks whose automated
program covered ATM and/or POS/debit transactions and banks that batch processed transactions
largest-to-smallest reported higher fee income than those that did not have these features.
13. Consumer complaints about automated overdraft programs were received by 12.5 percent of banks
that operated these programs, compared with consumer complaints from less than 1.0 percent of
banks offering linked-account programs and 1.5 percent of banks offering overdraft LOC programs.
Complaints about automated overdraft programs were more common for large institutions than for
small institutions (21.7 percent versus 10.6 percent).
14. Automated overdraft programs operated by banks were characterized as either “promoted” or
“nonpromoted.”4 The survey results revealed important differences in bank marketing and disclo-
sure practices between automated and nonautomated overdraft programs. However, in most cases
survey disclosure results regarding automated overdraft programs applied only to promoted
programs. Although banks that operated nonpromoted automated overdraft programs accounted
for a minority (8.5 percent) of banks, these banks were typically large and accounted for more than
half (51.7 percent) of the transaction account dollars held by all banks.
Results from the analysis of micro-level data from 39 banks with aggregate assets totaling
$332 billion and 6.5 million customer accounts are as follows:5
1. Micro-data banks reported 22.6 million NSF transactions incurred by consumer accounts during the
12-month period of analysis. Almost all (22.5 million) of the NSF transactions analyzed were
reported by banks that operated automated overdraft programs.
2. Although almost 75 percent of consumer accounts had no NSF transactions during the 12-month
period examined, almost 12 percent of consumer accounts had 1 to 4 NSF transactions, 5.0 percent
had 5 to 9 NSF transactions, 4.0 percent had 10 to 19 NSF transactions, and 4.9 percent had 20 or
more NSF transactions. Almost 9 percent of consumer accounts of banks reporting data had at least
10 NSF transactions during the 12-month period of analysis.6
3. Customers with 5 or more NSF transactions accrued 93.4 percent of the total NSF fees reported for
the 12-month period. Customers with 10 or more NSF transactions accrued 84 percent of the
reported fees. Customer accounts with 20 or more NSF transactions accrued over 68 percent of the
reported fees.
4. Customer accounts with 1 to 4 NSF transactions were charged $64 per year in NSF fees on average.
Customer accounts with 5 to 9 NSF transactions were charged $215 per year in NFS fees on aver-
age. Customer accounts with 10 to 19 NSF transactions were charged $451 per year in NFS fees on
average. Customer accounts with 20 or more NSF transactions were charged $1,610 per year in NSF
fees on average.
4
“Promoted” automated overdraft programs are those in which the customers are informed of the existence of the overdraft
program. “Nonpromoted” automated overdraft programs are those in which customers are not informed of the existence of the
overdraft program.
5
Bank assets reported as of December 2006.
6
For this study, NSF transaction data include NSFs covered by an automated overdraft program and returned or unpaid, as well
as NSFs processed on an ad hoc basis, although nearly all NSFs were reported by banks that operated automated overdraft
programs. Data on NSF transactions processed under linked-accounts or LOC programs were not collected.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 iv
Executive Summary
5. Accounts held by customers in low-income areas (in some areas, median annual income of less than
$30,000) were more likely than accounts in higher-income areas to incur overdraft charges.7 More
than 38 percent of low-income accounts had at least one NSF transaction, compared with 22
percent of upper-income accounts.
6. Recurrent overdrafts were also more likely the lower the income group. Among low-income custom-
ers, 16.7 percent of accounts had 1 to 4 NSF transactions, and 7.5 percent had 20 or more NSF
transactions. By comparison, 13.9 percent of accounts held by moderate-income consumers had 1 to
4 NSF transactions, and 6.4 percent had 20 or more NSF transactions. Consumers in upper-income
areas had 1 to 4 NSF transactions in 10.5 percent of accounts and 20 or more NSF transactions in
3.8 percent of accounts.
7. Almost half (48.8 percent) of all reported NSF transactions took place at POS/debit (41.0 percent)
and ATM (7.8 percent) terminals. Checks accounted for 30.2 percent of the reported NSF
transactions.
8. The median dollar amount of all 22.5 million transactions processed by the micro-data banks with
automated overdraft programs was $36. POS/debit NSF transactions were not only the most
frequent, but also the smallest, with a median dollar value of $20. The median transaction size of an
ATM withdrawal and a check that resulted in an NSF transaction were $60 and $66, respectively.
9. Assuming a $27 overdraft fee (the survey median), a customer repaying a $20 POS/debit overdraft
in two weeks would incur an APR of 3,520 percent; a customer repaying a $60 ATM overdraft in
two weeks would incur an APR of 1,173 percent; and a customer repaying a $66 check overdraft in
two weeks would incur an APR of 1,067 percent. More rapid repayment of the overdraft amount
results in higher APRs, and slower repayment results in lower APRs.8
10. Accounts held by young adults (ages 18 to 25) were the most likely among all age groups to have
automated overdraft NSF activity. Among young adult accounts, 46.4 percent incurred NSF activ-
ity, compared with 12.2 percent of accounts held by seniors (over age 62) and 31.9 percent of
accounts held by other adults. Nearly 15 percent of accounts held by young adults recorded more
than ten NSF transactions during the year, compared with 12.1 percent of adult accounts and 3.0
percent of senior accounts. Most NSF transactions made by young adult accounts (61.7 percent)
originated at a POS/debit terminal.
7
Actual median income limits for each income level designation vary by metropolitan statistical area. The income limit provided
is a benchmark calculated based on the 2006 median family income for the United States. (Source: U.S. Census Bureau, 2006
American Community Survey.)
8
These examples assume that the credit extended as a result of the overdraft occurrence equaled the total transaction, that
the consumer repaid the credit extended in two weeks, and that no additional fees are imposed on the consumer as a result of the
NSF. The APRs were calculated as follows: ((Fee Charged/Amount Financed)*365)/Term (14 days).
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 v
FDIC Study of Bank Overdraft Programs
Table of Contents
Executive Summary ii
I. Introduction 1
II. Methodology 1
II.1. Overdraft Survey Methodology 2
II.2. Micro-Level Data Methodology 3
Part One—Overdraft Survey 5
III. Overview of Overdraft Programs 5
III.1. Programs Operated 5
III.2. Account and Transaction Coverage 8
III.3. Transaction Processing Practices 11
III.4. Summary 12
IV. Overdraft Fees and Credit Limits 13
IV.1. Automatic Overdraft Program Fees and Coverage Limits 13
IV.2. Fees on Linked-Account Programs 19
IV.3. Fees, APRs, and Credit Limits on Overdraft LOCs 21
IV.4. Summary 24
V. Customer Enrollment, Marketing, and Disclosure Practices 25
V.1. Offering Overdraft Programs to New Customers 25
V.2. Enrollment in Overdraft Programs 27
V.3. Providing Comparative and Educational Information to Consumers 27
V.4. Product Line Information Provided to Consumers 30
V.5. ATM and POS/Debit Balance Disclosures 38
V.6. Summary 42
VI. Internal Controls and Monitoring Systems 43
VI.1. Written Policies 43
VI.2. Compliance Review Prior to the Implementation of the Overdraft Program 45
VI.3. Methods for Monitoring and Evaluating Overdraft Programs 46
VI.4. Ongoing Customer-Level Monitoring of Overdraft Programs 48
VI.5. Summary 50
VII. The Role of Vendors and Third Parties in Overdraft Practices 50
VII.1. Vendor Usage 51
VII.2. Vendor Compensation Structure 53
VII.3. Summary 55
Table of Contents
VIII. Growth and Profitability of Overdraft Programs: The Importance of
NSF-Related Fee Income for Bank Earnings 55
VIII.1. Income Share Results 56
VIII.2. Fee Income as Shares of Deposits 59
VIII.3. Charged-Off and Restructured Accounts 62
VIII.4. Net Fee-Income Ratios 65
VIII.5. Trends in NSF-Related Fee Income 65
VIII.6. NSF-Related Fee Income and the Adoption of Automated Overdraft Programs 67
VIII.7. Summary 68
Part Two—Micro-Level Data 70
IX. Micro-Level Data: Consumer Overdraft Usage 70
IX.1. Overview of Overdraft Programs Operated and Account Coverage of Micro-Data Banks 70
IX.2. Characteristics of Automated Overdraft Programs Operated by Micro-Data Banks 72
IX.3. Patterns of NSF Activity and Fees for Micro-Data Banks with Automated Overdraft Programs 76
IX.4. Summary 81
FDIC Study Group on Bank Overdraft Programs 83
Appendix A FDIC Overdraft Protection Survey I A-1
Appendix B FDIC Overdraft Protection Survey II B-1
List of Tables and Figures
Table II-1 Sample Summary 3
Table III-1 Formal Overdraft Programs Operated 5
Table III-2 Menu of Overdraft Programs Operated 6
Table III-3 Promoted and Nonpromoted Automated Programs 7
Figure III-1 Distribution of Study Population, by Automated Overdraft Programs Operated 7
Figure III-2 Distribution of Transaction Account Dollars Held in Study Population by Automated
Programs Operated 7
Table III-4 Banks with a Formal Overdraft Program Implemented by 2001 8
Table III-5 Accounts Covered by Formal Overdraft Programs 9
Table III-6 Account Coverage by Multiple Overdraft Programs 9
Table III-7 Order Overdraft Programs Invoked 10
Table III-8 Transactions Covered by Formal Overdraft Programs 10
Table III-9 Batch-Processing Methods 11
Table III-10 Transactions Paid First 12
Table IV-1 The Incidence of Fees Charged by Automated Overdraft Programs 14
Table IV-2 Usage Fees for Automated Overdraft Programs 14
Table IV-3 Per-Item Fees Charged by Automated Overdraft Programs 15
Table IV-4 Initiation and Maintenance Fees for Automated Overdraft Programs 17
Table IV-5 Features of Usage-Related Fees for Automated Overdraft Programs 17
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 vii
Table of Contents
Table IV-6 Credit Limits of Automated Overdraft Programs 18
Table IV-7 NSF Fees Charged by Study Population Banks 18
Table IV-8 The Incidence of Fees Charged by Linked-Account Overdraft Programs 19
Table IV-9 Fees for Linked-Account Overdraft Programs 20
Table IV-10 Features of Linked-Account Transfer Fees 21
Table IV-11 The Incidence of Noninterest Fees Charged by Overdraft LOC Programs 22
Table IV-12 Noninterest Fees Charged by Overdraft LOC Programs 23
Table IV-13 APRs for Overdraft LOC Programs 23
Table IV-14 Credit Limits of Overdraft LOC Programs 24
Table V-1 How Institutions with Two or More Overdraft Programs Determine Offerings to New Customers 26
Table V-2 Customer Qualification Rules for Automated Overdraft Programs 26
Table V-3 Whether Opt-In/Opt-Out 27
Table V-4 Information Provided to Consumers to Compare Overdraft Programs at Institutions with
Two or More Overdraft Programs 28
Table V-5 Educational Information Provided to Consumers by Institutions with Formal Overdraft Programs 29
Table V-6 Timing of Information Provided to Consumers for Promoted Automated Programs 31
Table V-7 Timing of Information Provided to Consumers for Linked-Account and Overdraft LOC Programs 32
Table V-8 Means of Informing Consumers about Promoted Automated Programs 33
Table V-9 Means of Informing Consumers about Linked-Account and Overdraft LOC Programs 34
Table V-10 Content of Information Provided to Consumers about Promoted Automated Programs 35
Table V-11 Content of Information Provided to Consumers about Linked-Account and Overdraft
LOC Programs 36
Table V-12 Advertising for Promoted Automated Programs 37
Table V-13 Advertising for Linked-Account and Overdraft LOC Programs 38
Table V-14 Balances Shown at ATMs for Promoted Automated Programs 39
Table V-15 Balances Shown at ATMs for Overdraft LOC Programs 40
Table V-16 Customer Notification of ATM and/or POS/Debit NSF for Automated Overdraft Programs 41
Table V-17 Customer Notification of ATM and/or POS/Debit NSF for Overdraft LOC Programs 42
Table VI-1 Overdraft Program Policies for Automated Overdraft Programs 44
Table VI-2 Compliance Review Policies for Automated Overdraft Programs 46
Table VI-3 Evaluation of Automated Overdraft Programs 47
Table VI-4 Maintenance of Consumer Information and Monitoring of Excessive Use of Overdraft Programs 48
Table VI-5 Other Monitoring of Automated Overdraft Programs 49
Table VI-6 Complaints about Automated Overdraft Programs 49
Table VII-1 Institutions’ Relationships with Vendors for Automated Overdraft Programs 51
Table VII-2 Length of Vendor Relationships for Automated Overdraft Programs 52
Table VII-3 Type of Vendor Program Used for Automated Overdraft Programs 53
Table VII-4 Vendor Compensation for Automated Overdraft Programs 54
Table VIII-1 NSF-Related Fee Income as a Share of Broader Income Measures 57
Table VIII-2 NSF-Related Fee Income as a Share of Broader Income Measures by Quartiles 58
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 viii
Table of Contents
Table VIII-3 NSF-Related Fee Income Ratios to Deposits Outstanding 60
Table VIII-4 NSF-Related Fee Income Ratios to Deposits Outstanding by Quartiles 61
Table VIII-5 Charged-Off and Restructured Deposit Accounts in 2006 63
Table VIII-6 Net NSF-Related Fee Income Ratios 64
Table VIII-7 Trends in NSF-Related Fee Income: 2002–2006 66
Table VIII-8 Trends in NSF-Related Fee Income Ratios by Quartiles 67
Figure VIII-1 Changes in the Ration of NSF-Related Fee Income to Net Operating Revenue 68
Figure VIII-2 Changes in the Ratio of NSF-Related Fee Income to Average Transaction Deposits 68
Table IX-1 Consumer Transaction Accounts and Deposit Dollars Held in Micro-Data Banks by Overdraft
Program Type Offered 71
Table IX-2 Overdraft Protection Programs Offered by Micro-Data Banks 71
Table IX-3 Overdraft Program Coverage for Consumer Transaction Accounts for All Micro-Data Banks 72
Table IX-4 Type of Accounts by Neighborhood Income for Micro-Data Banks with Automated Overdraft
Programs 72
Table IX-5 Opt-In/Opt-Out Policies of Micro-Data Banks with Automated Overdraft Programs 73
Table IX-6 Transactions Covered by Micro-Data Banks with Automated Overdraft Programs 73
Tabe IX-7 Transaction Batch-Processing Method for Micro-Data Banks with Automated
Overdraft Programs 74
Table IX-8 Median Family Income Thresholds by Census Tract Income Bracket 74
Table IX-9 Customer Accounts by Income Group for Micro-Data Banks with Automated
Overdraft Programs 75
Table IX-10 Account Balance by Average Dollar Amount Held and Income Group for Micro-Data
Banks with Automated Overdraft Programs 75
Table IX-11 Customer Accounts by Number of NSF Transactions per Year and Income Group for
Micro-Data Banks with Automated Overdraft Programs 76
Table IX-12 NSF Fees Charged by Income Group and by Number of NSF Transactions per Year
for Micro-Data Banks with Automated Overdraft Programs 77
Table IX-13 Annual Dollar Amount of NSF Fees Charged per Consumer Account for Micro-Data
Banks with Automated Overdraft Programs 77
Table IX-14 Customer Accounts and NSF Fees by Number of NSF Transactions per Year for Banks
with No Automated Overdraft Program 77
Table IX-15 NSF Transactions by Income Group and Transaction Type for Micro-Data Banks with
Automated Overdraft Programs 78
Table IX-16 NSF Transactions by Income Group and Transaction Type for Micro-Data Banks with
Nonautomated Overdraft Programs 78
Table IX-17 Median NSF Transaction Amount by Income Group and Type of Transaction for
Micro-Data Banks with Automated Overdraft Programs 79
Table IX-18 Customer Accounts by Age Group for Micro-Data Banks with Automated Overdraft Programs 80
Table IX-19 Customer Accounts by Number of NSF Transactions in a Year per Age Group for Micro-Data
Banks with Automated Overdraft Programs 80
Table IX-20 NSF Transactions by Age Group and Transaction Type for Micro-Data Banks with
Automated Overdraft Programs 80
Table IX-21 Median NSF Transaction Amount by Age Group and Type of Transaction for
Micro-Data Banks with Automated Overdraft Programs 81
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 ix
I. Introduction
This report details the methodology and findings of the Federal Deposit Insurance Corporation’s (FDIC)
study of overdraft programs operated by a segment of financial institutions. Over the past few years, the
use of automated overdraft programs has risen significantly, but little empirical data have been available
on these programs, their features, their management, the fees imposed, and consumer usage patterns.
The FDIC initiated this two-part study in 2006 to gather empirical data on the types, characteristics, and
use of overdraft programs operated by FDIC-supervised banks. The study was undertaken as part of the
agency’s mission to protect consumers, which it carries out by monitoring compliance with consumer
protection laws and regulations for the banks that it supervises, educating the public about financial
matters, and implementing programs that help promote economic inclusion. The study also reflects the
FDIC’s responsibility to monitor the safety and soundness of banks, including the proliferation of new or
different types of credit.
Data and information for this study were gathered through a survey of 462 randomly selected FDIC-
supervised institutions and a collection of customer and transaction-level data from a smaller set of the
surveyed FDIC-supervised institutions. The survey portion of the study was designed to obtain various
types of information related to overdraft programs, including features and characteristics, fees, processing
policies and practices, marketing practices, disclosure, growth and revenue trends, and the role of
vendors or other third parties in overdraft program implementation. The survey instrument can be found
in Appendix A of this document. The micro-data collection portion was designed to gather information
on the types of accounts and transactions that tend to generate the highest volume of overdraft fees and
the characteristics of consumers who use automated overdraft programs. The data collection instrument
can be found in Appendix B of this document.
The FDIC believes that objective information on these programs will help policymakers make better-
informed policy decisions and will help the public better understand the features and costs related to
automated overdraft programs. The study results also will help the banking industry develop more effec-
tive overdraft programs to better serve consumers.
The structure of this report is based on the survey and micro-data request, and the report is in two parts.
The first part is based on the survey instrument and contains an overview of the overdraft programs;
overdraft fees and credit limits; customer enrollment, marketing, and disclosure practices; internal
controls and monitoring systems; the role of vendors and third parties in overdraft practices; and the
growth and profitability of overdraft programs. The second part of this report is based on the micro-level
data gathered regarding consumer overdraft usage.1
II. Methodology
The results presented in this report rely on information gathered from U.S. banks through (1) a survey,
and (2) a collection of micro-level customer and transaction-level data (micro-data). The study popula-
tion included FDIC-supervised banks that were visited by examiners, most as part of scheduled on-site
examinations, from May through December 2007.2 The surveyed institutions represent 1,171 banks
located throughout the United States, which are defined later in Section II.1.
1
The actual survey and micro-data requests can be found in Appendices A and B, respectively.
2
As of the universe selection date, September 30, 2006, there were 5,237 FDIC-supervised banks, a number that included both
state-chartered, nonmember commercial banks and state-chartered savings banks.
November 2008
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 1
II. Methodology
II.1. Overdraft Survey Methodology
The overdraft survey involved the collection of data and information on FDIC-supervised overdraft
programs and practices through completion of a survey administered to a stratified random sample of
FDIC-supervised institutions. The survey, attached as Appendix A, consisted of approximately 90 ques-
tions about overdraft programs and practices.
The first section of the survey instrument collected aggregate and general information on each institu-
tion’s scope of overdraft services, income earned from overdraft programs, general overdraft processing
practices, and general disclosure practices.
The second section of the survey instrument collected detailed, program-specific data related to policies,
monitoring practices, customer disclosure, fees, account coverage, and use of third-party vendors for the
following types of overdraft programs or practices most commonly used by banks:
1) Automated overdraft programs: usually a computerized program by which the bank honors a
customer’s overdraft obligations using standardized procedures or a matrix to determine whether the
nonsufficient fund (NSF) occurrence qualifies for the overdraft coverage. “Promoted” automated
overdraft programs are those in which the customers are informed of the existence of the overdraft
program. “Nonpromoted” automated overdraft programs are those in which customers are not
informed of the existence of the overdraft program.
2) Linked transfer accounts (linked-accounts): defined as a contractual agreement between a bank
and a customer, linking the customer’s transaction account with other accounts within the bank,
including savings and credit card accounts. In the event of an overdraft, the bank fulfills the
customer’s obligations by transferring funds from the customer’s other accounts linked to the
customer’s transaction account.
3) Overdraft lines of credit (LOCs): a contractual agreement between a bank and a customer stating
that the bank will lend up to a specified amount over a defined period to cover overdraft items.
These programs exclude LOC programs that do not specifically cover overdraft items (e.g., home
equity LOCs). The bank initially extends the overdraft LOC after reviewing a customer’s qualifi-
cations using standard underwriting criteria; the LOC is considered a loan and requires standard
Truth in Lending Act (Regulation Z) disclosures. After the initial decision to grant the LOC, the
lender generally does not make a decision whether to cover individual overdrafts that fall under the
credit limit.
4) Ad hoc overdraft: an informal program to cover customers’ overdrafts. The study also asked institu-
tions about informal overdraft practices, if any, outside the parameters of the three formal programs
described above.
FDIC examiners administered the questionnaire during scheduled on-site visits to reduce reporting
burden, increase the accuracy of survey responses, and increase survey response rates. Extra steps were
taken to ensure that the degree of accuracy for the on-site questionnaire was high, including develop-
ment of standard computer programs to collect the data, specialized training of examiners to conduct the
on-site surveys, and regular discussions to answer any questions during the survey.
The study population included (1) 1,135 institutions with less than $5 billion in assets that were
scheduled for on-site visits by FDIC examiners between May and December 2007, and (2) 36 FDIC-
supervised institutions with more than $5 billion in assets regardless of whether an examination was
scheduled. Nonretail banks, such as credit card banks and industrial loan companies, were excluded from
the underlying study population since the focus of the survey was on retail-oriented overdraft programs
and policies.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 2
II. Methodology
The survey was administered to a stratified random sample of 462 financial institutions from among the
study population of 1,171 FDIC-supervised institutions.3 The strata were defined by three asset sizes
(institutions with less than $250 million in assets; assets between $250 million and $1 billion; and assets
greater than $1 billion). Institutions in the larger strata were sampled at higher rates to ensure that a
substantial proportion of deposit accounts held in the study population were included. In particular, all of
the 108 institutions in the population with more than $1 billion in assets were included in the sample.
Also, the institutions in the “$250 million to $1 billion” stratum were sampled at more than twice the
rate as those in the “less than $250 million” stratum. (See table below for exact sample sizes and sample
percentages.) To derive unbiased estimates for the study population, the differential sampling rates
applied across the size strata were taken into account.
As mentioned above, the survey sample included 36 FDIC-supervised institutions with more than
$5 billion in assets and 72 institutions with assets between $1 billion and $5 billion scheduled to be
examined during the data collection window. In addition, the survey sample included 354 banks
randomly selected from among 1,063 institutions with less than $1 billion in assets. Table II-1 below
summarizes the sample and study population and counts by strata; it also includes stratum sampling
percentages.
Table II-1
Sample Summary
Asset Size Stratum Study Population Total Sample Percent Sampled
Less than $250 million 851 222 26
$250 million to $1 billion 212 132 62
$1 billion to $5 billion 72 72 100
Greater than $5 billion 36 36 100
Total 1,171 462
Because the sample of institutions was selected from the 1,171 institutions in the study population, it is
not a statistical sample of all 5,237 FDIC-supervised institutions. Therefore, unbiased estimates of survey
characteristics can be made only for the 1,171 institutions in the study population. It is not possible to
draw statistically defensible inferences from the sample data about banks outside of the underlying study
population, including banks supervised by other agencies (such as national banks, and state-chartered
Federal Reserve member banks or thrifts).
II.2. Micro-Level Data Methodology
The micro-data request gathered account-level information and overdraft coverage for all customer
accounts. The micro-data also collected data on all NSF transactions processed under an institution’s
automated overdraft program or under ad hoc overdraft coverage. (This includes items returned as
unpaid.) The micro-data request can be found in Appendix B.
The micro-data were collected from a nonrandom subsample of the banks surveyed. As this portion of
the study involved a nonrandom sample, it is not possible to draw statistical inferences to any broader
population of banks using these data. Nevertheless, the FDIC believes that these data provide valuable
information about consumer usage and fee generation related to automated overdraft programs.
3
In addition, the FDIC collected survey data from seven Puerto Rican banks. However, analysis of survey results revealed that
the surveyed Puerto Rican banks had meaningful differences in their use of overdraft programs compared with the remainder of
the survey population and, in fact, tended not to offer such programs. Consequently, Puerto Rican banks were not included in this
study population.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 3
II. Methodology
Approximately 100 banks of different sizes, locations, and overdraft programs were identified as potential
nonrandom micro-data collection candidates. Large banks and banks whose information could more
easily be gathered through agreements with their existing software providers were given priority in partic-
ipation in the micro-level data collection.
To facilitate the data-gathering process for smaller banks, the FDIC relied on software developed by
vendors that serviced financial institutions in the survey sample. The FDIC also used standard computer
programs to ensure that data gathering was accurate and consistent across the study population. In addi-
tion, the FDIC conducted periodic telephone conferences with both FDIC field staff and bankers to help
disseminate information on how to gather and submit the requested information.
The micro-data used for this study include data for 39 of the 100 banks initially identified as potential
candidates, covering approximately 6.5 million consumer accounts and 22.6 million NSF transactions.
Twelve months of data between January 2005 and September 2008 were collected from each of these
banks; the data included information about account types, account category, and customer use of auto-
mated overdraft programs.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 4
Part One—Overdraft Survey
III. Overview of Overdraft Programs
This section provides an overview of survey findings related to overdraft programs and the timeframe of
program adoption, the accounts and transactions covered by these programs, and the methods by which
institutions processed transactions. The survey was primarily focused on automated overdraft programs;
however, to provide a basis of comparison, data were also collected for linked-account programs, over-
draft LOC programs, and ad hoc practices.
All tables stratify the study population banks by asset size, where small banks are defined as those with
less than $250 million in assets, medium banks as those with $250 million to $1 billion in assets, and
large banks as those with more than $1 billion in assets, as of December 2006.
III.1. Programs Operated
Study population banks were asked to define all overdraft programs in operation—specifically, whether
they had a promoted or a nonpromoted automated program, a linked-account program, or an overdraft
LOC program—and to describe any overdraft coverage services outside of these three formal programs.
The survey also asked the year and month in which banks adopted a specific overdraft program. The
first year in which a bank operated a program for six months or more was considered the “start year” of
the program.
Most study population banks (85.9 percent) operated some form of formal overdraft program, either
automated, linked-account, or overdraft LOC (see Table III-1). Among all study population banks,
40.5 percent operated an automated overdraft program, 62.1 percent a linked-account program, and
50.1 percent an overdraft LOC program. Less than 15 percent of banks had no formal overdraft
program in place, indicating that NSF transactions were processed on an ad hoc, discretionary basis.
Table III-1
Formal Overdraft Programs Operated
Number of Study Population Banks a
Percent of Column Total By Asset Size
Memo Item(s):
Did your institution operate this program $250 Million
at any point in 2006 or 2007? b Less than to Less than Greater than $1 Billion to Greater than
(Multiple answers allowed) All $250 Million $1 Billion $1 Billion $5 Billion $5 Billion
Automated 474 253 138 83 53 30
40.5 29.7 65.2 76.9 73.6 83.3
Linked accounts 728 502 144 81 54 27
62.1 59.0 68.2 75.0 75.0 75.0
Overdraft LOC programs 587 368 135 84 56 28
50.1 43.2 63.6 77.8 77.8 77.8
Total study population banks 1,171 851 212 108 72 36
100.0 100.0 100.0 100.0 100.0 100.0
Memo Item(s): Number of banks with 1,006 702 200 104 68 36
one or more formal overdraft program(s)
Percent of all study population banks 85.9 82.4 94.7 96.3 94.4 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Percentage shares do not sum to 100.0 percent because all answers that apply are included.
November 2008
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 5
Part One—Overdraft Survey III. Overview of Overdraft Programs
Table III-2
Menu of Overdraft Programs Operated
Number of Study Population Banks a
Percent of Column Total By Asset Size
$250 Million to
Did your institution operate this combination of Less than Less than Greater than
programs at any point in 2006 or 2007? All $250 Million $1 Billion $1 Billion
Automated, linked, and LOCs 199 81 64 54
17.0 9.5 30.3 50.0
Automated and linked 127 81 32 14
10.8 9.5 15.2 13.0
Automated and LOCs 54 15 26 13
4.6 1.8 12.1 12.0
Automated only 95 77 16 2
8.1 9.0 7.6 1.9
Linked and LOCs 204 165 30 9
17.5 19.4 14.4 8.3
Linked only 198 176 18 4
16.9 20.7 8.3 3.7
LOCs only 130 107 14 8
11.1 12.6 6.8 7.4
No formal program onlyb 165 150 11 4
14.1 17.6 5.3 3.7
Total study population banks 1,171 851 212 108
100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
No formal program refers to NSF/overdraft items not processed under automated overdraft, linked-account, or overdraft LOC programs.
Even among banks with formal overdraft programs, however, NSF transactions could be processed on an
ad hoc basis.4
Large banks tended to provide a fuller menu of overdraft programs, with 50.0 percent of large banks
operating all three formal programs (automated, linked-account, and overdraft LOC) (see Table III-2). In
contrast, most small banks (59.9 percent) operated only one program or no formal overdraft program at all.
While the share of all study population banks with an automated overdraft program was 40.5 percent, a
significantly greater share of large banks (76.9 percent) had an automated program, compared with
65.2 percent of medium banks and 29.7 percent of small banks (see Table III-1). The 83 large banks that
operated an automated overdraft program accounted for 72.6 percent of all transaction account deposit
dollars held in the study population banks, which suggests that the majority of accounts in the study
were held in banks with an automated program.5
As mentioned in the methodology section, automated overdraft programs can be promoted or nonpro-
moted. Promoted programs are actively offered to customers, while nonpromoted programs are imple-
mented without notification to the customer. Institutions with nonpromoted automated programs are
not subject to certain disclosure requirements under Regulation DD of the Truth in Savings Act that
4
For instance, if an account covered by an overdraft LOC program exceeded the overdraft credit limit, the NSF transaction
might not be processed under the formal overdraft LOC program, and the decision to pay or return the NSF transaction would be
made on an ad hoc basis.
5
Deposit dollars for each of the surveyed institution’s checking, negotiable order of withdrawal (NOW), and money market
demand (MMD) accounts were totaled from the 2006 Call Reports.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 6
Part One—Overdraft Survey III. Overview of Overdraft Programs
Table III-3
Promoted and Nonpromoted Automated Programs
Number of Study Population Banksa
Percent of Column Total By Asset Size
Memo Item(s):
Did your institution operate a $250 Million to
promoted or a nonpromoted Less than Less than Greater than $1 Billion to Greater than
automated program? All $250 Million $1 Billion $1 Billion $5 Billion $5 Billion
Promotedb 374 211 114 49 38 11
78.9 83.3 82.6 59.0 71.7 36.7
Nonpromoted only 100 42 24 34 15 19
21.1 16.6 17.4 41.0 28.3 63.3
Total with automated 474 253 138 83 53 30
100.0 100.0 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Fourteen institutions operated both a promoted automated and a nonpromoted automated program. These institutions are included only in the promoted total.
apply to institutions that promote the payment of overdrafts.6 Among study population banks with auto-
mated overdraft programs, the majority (78.9 percent) had a promoted program in place (see
Table III-3).7
Relative to all study population institutions, 31.9 percent of the institutions had a promoted automated
program, and 8.5 percent operated a nonpromoted program (see Figure III-1). Despite the larger propor-
tion of study population banks with promoted automated programs, an analysis of the dollar amount
held in transaction accounts of study population banks suggests that a greater proportion of consumer
accounts were likely covered by nonpromoted rather than by promoted automated programs. More than
half (51.7 percent) of the transaction account dollars held in study population banks were maintained in
institutions with nonpromoted automated programs (see Figure III-2).8 This finding is driven by the fact
that nonpromoted automated programs were more prevalent (63.3 percent) among the largest study
population banks, those with more than $5 billion in assets. These 19 institutions accounted for 45.1
percent of the transaction account dollars held in all study population banks.
Figure III-1 Figure III-2
Distribution of Study Population, Distribution of Transaction Account Dollars Held in
by Automated Overdraft Programs Operated Study Population by Automated Programs Operated
16.1%
31.9%
32.3%
59.5%
51.7%
8.5%
Promoted automated Nonpromoted automated only No automated program Promoted automated Nonpromoted automated only No automated program
6
See 12 C.F.R. 230.11. See also Final Rule, 70 Fed. Reg. 29582 (May 24, 2005).
7
Fourteen institutions had both promoted and nonpromoted automated overdraft programs, and as a result they were counted
in the promoted category.
8
Deposit dollars for each of the surveyed institution’s checking, NOW, and MMD accounts were totaled from the 2006 Call
Reports.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 7
Part One—Overdraft Survey III. Overview of Overdraft Programs
Table III-4
Banks with a Formal Overdraft Program Implemented by 2001
Number of Study Population Banksa
Percent of Column Total By Asset Size
Did your institution adopt this overdraft Less than $250 Million to Less Greater than
program by 2001? All $250 Million than $1 Billion $1 Billion
Automated 150 46 58 46
31.6 18.2 41.9 55.4
Total with automated 474 253 138 83
100.0 100.0 100.0 100.0
Linked accounts 650 445 132 74
89.4 88.5 91.1 91.4
Total with linked accounts 728 502 144 81
100.0 100.0 100.0 100.0
Overdraft LOC programs 504 307 120 77
85.9 83.3 89.3 91.7
Total with overdraft LOC programs 587 368 135 84
100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
Survey results show that the number of institutions in the study population providing automated over-
draft programs has grown rapidly in the past several years. Most study population banks with automated
programs (68.4 percent) initiated their program after 2001 (see Table III-4). Large banks were early
adopters; more than half (55.4 percent) had an automated program in place by 2001, compared with
41.9 percent of medium banks and 18.2 percent of small banks. In contrast, the majority of study popu-
lation banks that operated linked accounts and overdraft LOCs already had these programs in place by
2001 (89.4 percent and 85.9 percent, respectively).
III.2. Account and Transaction Coverage
Surveyed institutions were asked which retail customer accounts and transaction types were covered
under each overdraft program operated, whether an account could be covered by more than one over-
draft program, and the order by which applicable overdraft programs applied to the account.
The three main types of transaction accounts covered by overdraft programs are checking accounts,
negotiable order of withdrawal (NOW) accounts, and money market demand (MMD) accounts.9 Of
banks in the study that operated an automated program, all banks (100.0 percent) covered checking
accounts, while the majority (74.9 percent) covered NOW accounts, and about a third (32.2 percent)
covered MMD accounts (see Table III-5). Similarly, almost all institutions (99.3 percent) that operated
a linked-account program covered checking accounts, while sizable majorities also covered NOW and
MMD accounts. All institutions (100.0 percent) that operated overdraft LOC programs covered check-
ing accounts, and many also covered NOW and MMD accounts.
Of the 584 study population banks that operated more than one overdraft program, the majority (71.8
percent) allowed an account to be covered by more than one overdraft program (see Table III-6). Of
these 419 banks with multiple programs that allowed multiple coverage, 261 (62.2 percent) operated an
automated overdraft program, while the remainder had only a linked-account and an overdraft LOC
program. For the vast majority (95.8 percent) of these 261 banks, overdraft coverage under a linked-
9
Although surveyed institutions were asked whether the overdraft programs covered savings accounts, these accounts were
not included in the analysis because they are typically not the transaction accounts by which third parties are paid. Retail banking
customers typically withdraw funds from and make payments with their checking accounts; thus, overdraft programs are most
relevant for this type of account.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 8
Part One—Overdraft Survey III. Overview of Overdraft Programs
Table III-5
Accounts Covered by Formal Overdraft Programs
Number of Study Population Banks
Percent of Column Total By Overdraft Programs Offered
For which of the following accounts did your
institution offer the program? a
(Multiple answers allowed) Automated Linked-Account Overdraft LOC
Checking 474 722 587
100.0 99.3 100.0
NOW 355 595 432
74.9 81.7 73.6
MMD 153 439 212
32.2 60.3 36.2
Total with program 474 728 587
100.0 100.0 100.0
a
Percentage shares do not sum to 100.0 percent because all answers that apply are included.
Table III-6
Account Coverage by Multiple Overdraft Programs
Number of Study Population Banksa
Percent of Column Total By Asset Size
$250 Million to
Did your institution allow an account to be Less than Less than Greater than
covered by more than one overdraft program? All $250 Million $1 Billion $1 Billion
No 164 107 40 17
28.2 31.5 26.3 18.9
Yes 419 234 112 73
71.8 68.5 73.7 81.1
584 341 152 90
Total that operated more than one program 100.0 100.0 100.0 100.0
Had automated 261 107 88 65
62.2 45.9 78.6 89.0
Did not have automated 159 127 24 8
37.8 54.1 21.4 11.0
Total that operated more than one program and 419 234 112 73
allowed multiple coverage 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
account or an overdraft LOC program applied to the account first, before the automated program (see
Table III-7). In 4.2 percent of the cases, therefore, an overdraft would be covered by the automated
program before any linked-account or overdraft LOC program applied. Further, despite invoking a
linked-account or an overdraft LOC program first, 9.0 percent of these institutions operated all three
programs, but invoked their automated program second rather than third.
Regarding transaction coverage, overdraft programs can cover four broad categories of transactions:
paper checks or equivalents, automated teller machine (ATM) transactions, point-of-sale (POS)/debit
transactions, and automated clearing house (ACH) transactions.10 The majority (80.5 percent) of institu-
tions that operated an automated program covered all four categories (see Table III-8). Most of the study
10
Equivalents are transactions that started off as a paper check—for example, a warrant, a teller check, or a check that a
customer presents to a store to be scanned later. The customer expects that the payment will be processed like a regular check.
ACH transactions include, for example, electronic bill payments and automatic debits.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 9
Part One—Overdraft Survey III. Overview of Overdraft Programs
population banks with automated programs (81.0 percent) allowed overdrafts for ATM and POS/debit
transactions. Similarly, more than 80.0 percent of banks with a linked-account or an overdraft LOC
program covered all four transaction types, including ATM and POS/debit.
Table III-7
Order Overdraft Programs Invoked
Number of Study Population Banks a
By Type of Automated
Percent of Column Total By Asset Size Program
In what order did your institution $250 Million
invoke a customer’s applicable Less than to Less than Greater than
overdraft programs? All $250 Million $1 Billion $1 Billion Nonpromoted Promoted
Three programs
Linked and LOC before automatedb 123 42 40 41 40 83
47.3 39.3 45.5 63.1 61.6 42.6
Linked or LOC before automatedb 24 12 8 4 1 23
9.0 10.7 9.1 6.2 1.5 11.5
Automated before linked and LOC 3 0 0 3 2 1
1.2 0.0 0.0 4.6 3.1 0.5
Two programs
Linked or LOC before automatedb 103 54 35 14 19 84
39.5 50.0 40.0 21.5 29.8 42.7
Automated before linked or LOC 8 0 5 3 3 5
3.0 0.0 5.5 4.6 4.0 2.7
Total that operated more than one 261 107 88 65 65 195
program, allowed multiple coverage, 100.0 100.0 100.0 100.0 100.0 100.0
and had automated
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Fourteen institutions that reported only that they invoked their linked-account then their overdraft LOC program also operated an automated overdraft program. Four institutions that reported that they
invoked their linked-account then automated overdraft program also operated an overdraft LOC program. It is presumed that the omitted program was invoked last.
Table III-8
Transactions Covered by Formal Overdraft Programs
Number of Study Population Banks
Percent of Column Totala By Overdraft Programs Offered
Which transactions were covered by your
institution’s program in the event of an overdraft?
(Multiple answers allowed) Automated Linked-Account Overdraft LOC
Checks, ATM, POS/debit, and any ACH 381 601 491
80.5 82.6 83.7
ATM and POS/debit 384 603 496
81.0 82.9 84.6
Total with program 474 728 587
100.0 100.0 100.0
a
Percentage shares do not sum to 100.0 percent because all answers that apply are included.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 10
Part One—Overdraft Survey III. Overview of Overdraft Programs
III.3. Transaction Processing Practices
Surveyed institutions were asked how transactions were processed, including the method used to batch-
process transactions and the order in which transactions were processed if transaction types were ranked
before payment.
In batch processing, multiple transactions are bundled into one unit and processed together at some
point in the day. All institutions do some level of batch processing, regardless of other primary process-
ing methods used.11 The general batch-processing methods are by check number, by presentation order,
by size largest-to-smallest, and by size smallest-to-largest. The order in which transactions are processed
can affect overdraft activity, since paying large transactions first could increase the number of
overdrafts.12
While 47.2 percent of institutions batch processed transactions by size smallest-to-largest, a sizable share
(24.7 percent) batch processed largest-to-smallest (see Table III-9). In particular, more than one-half
(53.7 percent) of the large banks in the study batch processed transactions starting with the largest,
compared with about a quarter (25.8 percent) of medium banks and a fifth (20.7 percent) of small banks.
Among study population institutions with an automated program, the largest share (34.5 percent) batch
processed transactions largest-to-smallest, while 30.2 percent processed them smallest-to-largest. A
sizable share (27.1 percent) processed by check number. In comparison, the majority (58.6 percent) of
institutions that did not operate an automated program batch processed transactions smallest-to-largest.
Institutions also process transactions based on type. The different types of transactions processed include
ACH, in-house ATM, system ATM, cash, POS/debit, online payments, on-us checks, and other transac-
tions. Among study population banks, 621 (53.0 percent) processed transactions primarily by type. Of
Table III-9
Batch-Processing Methods
Number of Study Population Banks a
By Overdraft Programs By Type of
Percent of Column Total By Asset Size Offered Automated Program
For those items that are batch pro­ Less $250
cessed, which method best describes than Million to Greater Has Linked No
the order in which transactions were $250 Less than than $1 Auto- and/or Formal Non-
typically paid by your institution? All Million $1 Billion Billion mated LOC Only Program promoted Promoted
By check number 213 134 59 19 128 79 5 12 116
18.2 15.8 28.0 17.6 27.1 14.8 3.3 12.2 31.1
By order of presentation 89 73 10 7 35 37 18 2 33
7.6 8.6 4.5 6.5 7.3 6.9 10.9 2.0 8.7
By size, largest-to-smallest 289 176 55 58 164 96 29 48 116
24.7 20.7 25.8 53.7 34.5 18.0 17.9 47.8 31.0
By size, smallest-to-largest 553 449 87 18 143 313 97 34 109
47.2 52.7 40.9 16.7 30.2 58.9 58.6 33.9 29.2
Other 27 19 2 6 4 7 15 4 0
2.3 2.3 0.8 5.6 0.8 1.4 9.3 4.0 0.0
Total study population banks 1,171 851 212 108 474 532 165 100 374
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
11
For example, even if an institution always processes checks first, before other transactions, rules need to be established for
how a group of checks that come in at the same time are processed.
12
For example, if a customer has an account with a $50 balance and a total of five items (one item at $100 and four items at $10)
are presented against it, the customer will have five overdrawn items in a largest-to-smallest batch process and only one over-
drawn item in a smallest-to-largest batch process.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 11
Part One—Overdraft Survey III. Overview of Overdraft Programs
Table III-10
Transactions Paid First
Number of Study Population Banks a
By Type of Automated
Percent of Column Total By Asset Size By Overdraft Programs Offered Program
In what order were trans­ Less than $250 Million Greater Has Linked No
actions typically paid by $250 to Less than than $1 Auto- and/or Formal Non-
your institution? All Million $1 Billion Billion mated LOC Only Program promoted Promoted
Cash 375 268 75 31 146 174 55 26 120
60.4 61.9 55.3 60.8 53.7 63.0 75.4 59.9 52.5
POS/debit 66 46 14 6 34 33 0 3 31
10.7 10.6 10.6 11.8 12.4 11.8 0.0 6.0 13.7
In-house ATM 60 38 14 7 44 11 5 10 34
9.6 8.8 10.6 13.7 16.1 4.1 6.6 22.2 14.9
On-us checks 40 27 11 2 15 25 0 4 12
6.5 6.2 8.2 3.9 5.7 8.9 0.0 8.3 5.2
System ATM 30 23 6 1 16 9 5 0 16
4.9 5.3 4.7 2.0 5.8 3.4 7.5 0.0 6.9
Online payments 21 15 5 1 10 11 0 0 10
3.4 3.5 3.5 2.0 3.8 3.9 0.0 0.0 4.5
Other 16 12 3 1 2 10 4 2 0
2.5 2.7 2.4 2.0 0.6 3.7 5.3 3.7 0.0
ACH 12 4 6 2 5 3 4 0 5
2.0 0.9 4.7 3.9 1.9 1.2 5.3 0.0 2.3
Total that ranked trans- 621 433 136 51 272 276 73 44 228
actions for processing 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
these institutions, 60.4 percent paid cash transactions first (see Table III-10).13 POS/debit and in-house
ATM transactions were paid first by 10.7 and 9.6 percent, respectively, of study population banks that
processed transactions by type. Banks with no formal program (75.4 percent) were more likely to pay
cash transactions first than banks with only a linked-account, overdraft LOC program, or both (63.0
percent), as well as those that operated an automated program (53.7 percent). Institutions with
promoted automated programs were more likely than those with nonpromoted programs to pay POS/
debit transactions first, while banks with nonpromoted programs were more likely than those with
promoted programs to pay in-house ATM transactions first.
III.4. Summary
Of the study population of institutions, 85.9 percent operated a formal overdraft program, either through
an automated program, a linked-account program, or an overdraft LOC program. Large banks tended to
have a fuller menu of overdraft coverage services and were more likely than small and medium institu-
tions to operate all three formal programs.
While 40.5 percent of study population operated an automated overdraft program, a greater share of
large banks (76.9 percent) did so. The large banks that operated an automated overdraft program
accounted for 72.6 percent of all transaction account deposit dollars held in the study population banks,
which suggests that the majority of accounts in the study were held in banks with an automated over-
draft program.14
13
Cash transactions include teller services, where cash may be demanded by an account holder and immediately provided.
14
Deposit dollars for each of the surveyed institutions’ checking, NOW, and MMD accounts were totaled from the 2006 Call
Reports.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 12
Part One—Overdraft Survey IV. Overdraft Fees and Credit Limits
The majority (78.9 percent) of automated programs operated by study population banks were promoted
programs. However, analysis of the transaction account dollars held in study population banks suggests
that nonpromoted automated program coverage was more prevalent. Although banks that operated
nonpromoted automated programs accounted for 8.5 percent of the study population, these banks held
more than half (51.7 percent) of the transaction account dollars maintained in study population banks.
It is important to note that institutions with nonpromoted automated programs are not subject to certain
disclosure requirements.
Of institutions that operated an automated program, a significant share (68.4 percent) initiated their
programs after 2001, with large institutions being early adopters. In contrast, the vast majority of study
population banks with linked-accounts and overdraft LOCs (89.4 percent and 85.9 percent, respectively)
had their programs in place by 2001.
Account and transaction overdraft coverage was similar across all types of overdraft programs. Regardless
of the overdraft program in place, almost all banks covered checking accounts and sizable shares covered
NOW and MMD accounts. The majority (71.8 percent) of institutions with multiple overdraft programs
allowed an account to be covered by more than one overdraft program. Of the banks with automated
programs that allowed overdraft coverage under multiple programs, 4.2 percent covered an overdraft by
an automated program before any linked-account or overdraft LOC program applied. In terms of transac-
tions covered, regardless of the overdraft program, more than 80 percent of banks covered all transaction
types, including ATM or POS/debit transactions.
The order in which transactions are paid by a bank can affect overdraft activity, since processing a large
transaction first could increase the number of overdrafts. While 47.2 percent of institutions batch
processed transactions by size smallest-to-largest, a sizable share (24.7 percent) batch processed largest-
to-smallest. In particular, more than half (53.7 percent) of large banks batch processed transactions by
size largest-to-smallest.
IV. Overdraft Fees and Credit Limits
This section discusses survey findings related to overdraft fees and credit limits. Specifically, the survey
included questions about NSF-related usage fees, initiation fees, periodic maintenance fees, fees charged
whether or not a service is used, and other related topics. Usage-related fee questions were included to
ascertain whether these fees were assessed on a per-transaction (per-item) or daily-occurrence basis,
whether the fees varied with the number of NSF transactions, and whether subsequent fees were assessed
on accounts where balances remained negative. Banks operating overdraft LOCs were also asked about
the annual percentage interest rate (APR) charged on funds advanced. In addition, the survey gathered
information about credit limits (the maximum amount of funds that would be advanced) for automated
overdraft programs and overdraft LOC programs. Survey findings related to fees and credit limits are
discussed as they relate to automated overdraft programs, linked-account programs, and overdraft LOC
programs.
IV.1. Automatic Overdraft Program Fees and Coverage Limits
Virtually all of the banks that operated automated overdraft programs (99.7 percent) charged NSF-
related usage fees (see Table IV-1). This finding did not vary with bank size. Initiation and maintenance
fees on automated overdraft programs were much less common. Thirteen institutions in the study
assessed an initiation fee, and seven banks charged periodic maintenance fees, in addition to usage fees;
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 13
Part One—Overdraft Survey IV. Overdraft Fees and Credit Limits
only two institutions charged all three types of fees.15 Usage fees for automated overdraft coverage were
almost always assessed on a per-item basis (by 98.4 percent of banks having an automated program) as
opposed to a daily-occurrence basis (see Table IV-2). This finding was true for banks in all size classes.
Table IV-1
The Incidence of Fees Charged by Automated Overdraft Programs
Number of Study Population Banksa
Percent of Column Total By Asset Size
What types of fees are charged by your Less than $250 Million to Greater than
institution? All $250 Million Less than $1 Billion $1 Billion
None of the three fees 2 0 2 0
0.3 0.0 1.2 0.0
Only usage fee 455 242 132 82
96.0 95.5 95.4 98.8
Maintenance and usage fees 5 4 0 1
1.0 1.5 0.0 1.2
Initiation and usage fees 11 8 3 0
2.3 3.0 2.3 0.0
All three fees 2 0 2 0
0.3 0.0 1.2 0.0
Total with automated 474 253 138 83
100.0 100.0 100.0 100.0
Memo Item(s):
Total charging usage fee 472 253 136 83
Percent of banks with automated 99.7 100.0 98.8 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
Table IV-2
Usage Fees for Automated Overdraft Programs
Number of Study Population Banks a
Percent of Column Total By Asset Size
How are overdraft items charged by your Less than $250 Million to Greater than
institution? All $250 Million Less than $1 Billion $1 Billion
No fee charged 2 0 2 0
0.3 0.0 1.2 0.0
Charged per daily occurrence 4 4 0 0
0.8 2 0 0
Charged on a per-item basis 467 249 136 81
98.4 98.5 98.8 97.6
Item(s) not reported 2 0 0 2
0.4 0.0 0.0 2.4
Total with automated 474 253 138 83.0
100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
15
The much lower incidence of initiation and maintenance fees on fee-based programs, in part, reflects the fact that nonpro-
moted automated programs would not have initiation or maintenance fees. (Note that when an examiner defined a bank’s auto-
mated fee-based program as nonpromoted, questions about maintenance fees and initiation fees were not asked.) However, the
very limited presence of these fees also indicates that they are relatively uncommon, even among study population banks operat-
ing promoted programs.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 14
Part One—Overdraft Survey IV. Overdraft Fees and Credit Limits
Automated overdraft per-transaction usage fees ranged from $10 to $38, and the median fee charged was
$27 (see Table IV-3). In this context, a $27 fee charged for a single advance of $60 that was repaid in
two weeks roughly translated into an APR of 1,173 percent. Per-item usage fees tended to be slightly
higher for large banks with automated overdraft programs. The average automated overdraft NSF fee for
large banks was $30, compared with $25 for small banks. Usage fees also tended to be higher for banks
that batch processed items starting with the largest amount (compared with banks that processed items
starting with the smallest amount) and for banks whose programs automatically covered ATM or POS/
Table IV-3
Per-Item Fees Charged by Automated Overdraft Programs
Dollar Amounts a
Number of Study Population Banks By Transactions
Percent of Banks with Program By Asset Size By Processing Method Covered
$250 Does Not
What is the highest fee Less than Million to Greater Largest- Smallest- Cover Covers
charged by your institution to $250 Less than than $1 to- Not Size to- ATM or ATM or
pay an NSF item? All Million $1 Billion Billion Smallest Related Largest POS/Debit POS/Debit
All Reporting Fee Greater than 0
Minimum 10.00 10.00 16.00 22.00 10.00 16.00 15.00 10.00 16.00
Mean 27.12 25.79 27.65 30.27 28.64 27.14 25.35 25.12 27.47
Median 27.00 25.00 28.00 30.00 29.00 27.50 25.00 25.00 27.50
Maximum 38.00 33.00 35.00 38.00 38.00 35.00 35.00 35.00 38.00
Total with automated with fee 472 253 136 83 164 166 143 70 402
greater than 0
Percent of banks with 99.7 100.0 98.9 100.0 100.0 99.1 100.0 100.0 99.6
automated
Does Not Use Vendor
Minimum 15.00 15.00 24.00 22.00 24.00 23.00 15.00 15.00 20.00
Mean 27.85 26.44 27.21 30.99 29.94 27.31 24.75 25.07 28.34
Median 28.00 27.00 27.00 30.00 30.00 27.50 25.00 25.00 28.00
Maximum 38.00 32.00 35.00 38.00 38.00 34.00 35.00 33.00 38.00
Total with automated and fee 214 96 63 56 97 64 54 32 182
greater than 0 and does not
use vendor
Percent of banks with 45.2 37.9 45.4 67.5 59.0 38.1 37.8 46.1 45.1
automated
Uses Vendor
Minimum 10.00 10.00 16.00 23.00 10.00 16.00 20.00 10.00 16.00
Mean 26.49 25.40 28.03 28.66 26.69 27.03 25.71 25.17 26.71
Median 25.00 25.00 29.00 29.00 28.00 27.00 25.00 25.00 25.00
Maximum 35.00 33.00 35.00 35.00 35.00 35.00 35.00 35.00 35.00
Total with automated and fee 257 157 74 26 66 102 89 38 219
greater than 0 and uses vendor
Percent of banks with 54.2 62.1 53.5 31.3 40.4 60.9 62.2 53.9 54.3
automated
Memo Item(s):
Total with automated 474 253 138 83 164 167 143 70 404
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
a
Includes fee amounts for four institutions that charged fee on a per-daily-occurrence basis.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 15
Part One—Overdraft Survey IV. Overdraft Fees and Credit Limits
debit transactions (compared with banks whose programs did not cover these transactions).16 Where
charged, initiation fees on promoted automated overdraft programs ranged from $6 to $30, and annual
maintenance fees ranged from $72 to $120 (see Table IV-4).
Most banks (89.1 percent) with automated overdraft programs reported that usage fees did not vary with
NSF activity (see Table IV-5). Among institutions with fees that vary with NSF activity, anecdotal
comments indicated limits on the total dollar amount of fees that a customer could incur during a speci-
fied period of time in the range of $100 to $300 per day or per statement period. Other comments indi-
cated per-item fees that increased with NSF activity.
Approximately 25 percent of banks with automated overdraft programs indicated that subsequent fees
were assessed on accounts that remained in negative balance status (see Table IV-5). Large banks were
more likely to assess subsequent fees. The share of large banks assessing subsequent fees was 36.1
percent, compared with 19.7 percent for small banks. Anecdotal survey comments indicated that such
fees typically took the form of flat fees or interest charged on a percentage basis. Some banks reported
having grace periods, ranging from 1 to 33 days before such subsequent fees were assessed.
Most banks (73.0 percent) with automated overdraft programs established overdraft coverage limits for
customers in their written policies, consistent with the bank’s lending policies (see Table IV-6).
However, large banks were more likely than small banks to specify coverage limits on automated over-
draft programs in their written policies. About 83 percent of large banks established credit limits,
compared with 65.2 percent of small banks. Automated overdraft coverage limits stipulated in written
policies ranged from $85 to $10,000, and the median credit limit was $500. As with per-item fees, over-
draft coverage limits established in policies also tended to be lower for small banks.
All institutions, regardless of the overdraft programs in place, processed some NSF transactions on an ad
hoc basis.17 Table IV-7 compares the NSF fees charged by the 472 banks with automated overdraft
programs that charged NSF fees to the fees charged by the 690 banks in the study population that did
not operate automated overdraft programs but charged NSF fees.18 Fees charged to process NSF items
tended to be somewhat higher for banks that operated automated overdraft programs, regardless of bank
size and transaction batch-processing method.
The median amount charged by banks to pay an NSF under an automated program was $27.00 (mean of
$27.12), as reported above, compared with $25.00 (mean of $22.90) charged by banks without auto-
mated programs for NSF items processed on an ad hoc basis. Banks without a formal overdraft program
tended to charge the lowest NSF fees. The median NSF fee for banks that did not operate a formal
program was $20.00 (mean of $20.84).
16
Multivariate regressions examining which factors were systematically related to the usage fees on automated overdraft
programs indicated that fees were higher for banks in larger asset-size classes, banks whose programs covered ATM or POS/
debit transactions, and banks that batch processed transactions from largest to smallest. Usage fees tended to be lower for banks
that did not also offer an overdraft LOC program. Given these factors, vendor use and whether the bank operated a promoted or a
nonpromoted program were not systematically related to usage fees on automated overdraft programs reported for study popula-
tion banks.
17
For instance, if an account covered by an overdraft LOC program exceeded the overdraft credit limit, the NSF transaction
might not be processed under the formal overdraft LOC program, and the decision to pay or return the NSF transaction would be
made on an ad hoc basis. For almost all institutions in the survey population that operated automated overdraft programs, fees
charged for processing NSF items that were not covered by a formal overdraft program were equal to the per-item fee charged
under the automated program.
18
For most of the survey population operating automated programs, the per-item fee charged when items were paid under auto-
mated overdraft programs was the same as the fee charged by the bank on NSF items that it did not pay. These two fees were
equal to each other for 98.1 percent of 451 institutions reporting the two fee items.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 16
Part One—Overdraft Survey IV. Overdraft Fees and Credit Limits
Table IV-4
Initiation and Maintenance Fees for Automated Overdraft Programs
Dollar Amounts By Asset Size
Number of Study Population Banks
$250 Million to
Percent of Banks with Program
Less than Less than $1 Greater than
All $250 Million Billion $1 Billion
What is the initiation fee associated with the program?
Minimum 6.00 27.00 6.00 NA
Mean 25.69 28.00 22.00 NA
Median 29.00 28.00 30.00 NA
Maximum 30.00 29.00 30.00 NA
Total with automated with fee greater than 0 12 8 5 NA
Percent of banks with automated 2.6 3.0 3.5 NA
What is the annual maintenance fee to maintain the program?
Minimum 72.00 96.00 72.00 120.00
Mean 93.75 96.00 72.00 120.00
Median 96.00 96.00 72.00 120.00
Maximum 120.00 96.00 72.00 120.00
Total with automated with fee greater than 0 6 4 2 1
Percent of banks with automated 1.4 1.5 1.2 1.2
Memo Item(s):
Total with automated 474 253 138 83
100.0 100.0 100.0 100.0
Note: NA = not applicable.
Table IV-5
Features of Usage-Related Fees for Automated Overdraft Programs
By Asset Size
Number of Study Population Banksa
Percent of Column Total $250 Million to
Less than Less than $1 Greater than
All $250 Million Billion $1 Billion
Does the per item/occurrence fee change with the number of items/occurrences with insufficient funds?
No 423 234 120 69
89.1 92.4 87.2 83.1
Yes 52 19 18 14
10.9 7.6 12.8 16.9
Total with automated 474 253 138 83
100.0 100.0 100.0 100.0
Once an account is overdrawn, are additional fees or interest assessed subsequent to regular per item/per occurrence fees for
being in overdraft status?
No 357 203 101 53
75.4 80.3 73.3 63.9
Yes 117 50 37 30
24.6 19.7 26.7 36.1
Total with automated 474 253 138 83
100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 17
Part One—Overdraft Survey IV. Overdraft Fees and Credit Limits
Table IV-6
Credit Limits of Automated Overdraft Programs
Dollar Amount
Number of Study Population Banks
Percent of Banks with Program By Asset Size
$250 Million to
If your institution has adopted written policies and specified a Less than Less than $1 Greater than
cap on advances, what is the dollar limit? All $250 Million Billion $1 Billion
Minimum 85 100 85 300
Mean 783.7 653.5 801.2 1,066.1
Median 500 500 700 750
Maximum 10,000 1,700 3,000 10,000
Total with automated reporting limit 346 165 112 69
Percent of banks with automated 73.0 65.2 81.4 83.1
Memo Items(s):
Number of banks with automated 474 253 138 83
100.0 100.0 100.0 100.0
Banks with no written policy 81 61 14 5
17.0 24.2 10.5 6.0
Banks having written policy but no limit specified 47 27 11 9
9.9 10.6 8.1 10.8
Table IV-7
NSF Fees Charged by Study Population Banks
Dollar Amount a
Number of Study Population
Banks By Asset Size By Overdraft Programs Offered By Batch Processing Mode
Has Non- Has
Less $250 promoted Promoted
What is the highest than Million to Greater Automated Automated Has Linked No Largest- Smallest-
fee charged to PAY $250 Less than than $1 Overdraft Overdraft and/or LOC Formal to- Not Size to-
an NSF item? All Million $1 Billion Billion Program Program Program(s) Program Smallest Related Largest
No automated overdraft program
Minimum 7.50 7.50 15.00 15.00 NA NA 7.50 9.00 15.00 7.50 10.00
Mean 22.90 22.26 26.80 27.10 NA NA 23.54 20.84 25.45 23.70 21.81
Median 25.00 24.00 27.75 25.00 NA NA 25.00 20.00 25.00 25.00 20.00
Maximum 50.00 35.00 37.50 50.00 NA NA 50.00 32.00 37.00 50.00 35.00
Total with fee 690 594 71 25 NA NA 525 165 125 156 408
greater than 0
Automated overdraft program
Minimum 10.00 10.00 16.00 22.00 15.00 10.00 NA NA 10.00 16.00 15.00
Mean 27.12 25.79 27.65 30.27 28.17 26.83 NA NA 28.64 27.14 25.35
Median 27.00 25.00 28.00 30.00 30.00 27.00 NA NA 29.00 27.50 25.00
Maximum 38.00 33.00 35.00 38.00 38.00 36.00 NA NA 38.00 35.00 35.00
Total with fee 472 253 136 83 100 372 NA NA 164 166 143
greater than 0
a
For banks that do not operate an automated overdraft program, this is the NSF fee reported by the bank for processing NSF items not covered under another formal program.
Note: NA = not applicable.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 18
Part One—Overdraft Survey IV. Overdraft Fees and Credit Limits
Table IV-8
The Incidence of Fees Charged by Linked-Account Overdraft Programs
Number of Study By Presence of
Population Banksa Automated Overdraft By Transactions
Percent of Column Total By Asset Size Program By Processing Method Covered
Less $250 Has No Does Not
What types of fees than Million to Greater Automated Automated Largest- Not Smallest- Cover ATM Covers
are charged by $250 Less than than $1 Overdraft Overdraft to- Size to- or POS/ ATM or
your institution? All Million $1 Billion Billion Program Program Smallest Related Largest Debit POS/Debit
None of the three 356 276 61 19 122 234 70 81 205 52 304
fees 48.9 55.0 42.2 23.5 37.4 58.3 37.4 40.7 60.1 58.5 47.6
Only initiation fee 7 4 3 0 2 5 0 2 5 0 7
1.0 0.8 2.2 0.0 0.5 1.4 0.0 0.8 1.6 0.0 1.1
Only maintenance 6 0 2 4 6 0 4 0 2 0 6
0.8 0.0 1.1 4.9 1.7 0.0 2.1 0.0 0.5 0.0 0.9
Only transfer fee 335 207 75 53 182 154 103 114 119 37 299
46.1 41.2 52.2 65.4 55.9 38.2 54.8 57.2 34.8 41.5 46.7
Maintenance and 2 0 0 2 1 1 1 0 1 0 2
transfer fees 0.3 0.0 0.0 2.5 0.3 0.3 0.5 0.0 0.3 0.0 0.3
Initiation and 19 15 3 0 11 8 8 2 9 0 19
transfer fees 2.5 3.1 2.2 0.0 3.3 1.9 4.1 0.8 2.7 0.0 2.9
All three fees 1 0 0 1 1 0 1 0 0 0 1
0.1 0.0 0.0 1.2 0.3 0.0 0.5 0.0 0.0 0.0 0.2
Item(s) not reported 2 0 0 2 2 0 1 1 0 0 2
0.3 0.0 0.0 2.5 0.6 0.0 0.5 0.5 0.0 0.0 0.3
Total with linked 728 502 144 81 325 402 188 199 341 88 639
accounts 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
IV.2. Fees on Linked-Account Programs
Linked-account programs allow customers to link other accounts at the same institution to their transac-
tion account, which permits them to use funds in another account to cover NSF transactions. Almost
half (48.9 percent) of the 728 banks operating linked-account programs did not charge initiation, main-
tenance, or usage-related transfer fees for this type of service (see Table IV-8). Small banks were less
likely than other banks to charge any of these fees for linked-account services, as were banks that did not
operate an automated overdraft program or those that batch-processed items starting with the smallest
item.19 Less than 4.0 percent of banks with linked-account programs charged initiation fees, and where
such fees were charged, they ranged from $1 to $30 (see Table IV-9). Slightly more than 1 percent of
banks reported charging periodic maintenance fees for linked-account services. Where assessed, such fees
ranged from $12 to $36 annually.
The most common fee associated with linked-account overdraft programs for banks in the study popula-
tion was a usage-related funds transfer fee (see Table IV-9). Of the 728 institutions operating linked-
account programs, almost half (49.2 percent) reported imposing a transfer fee at the time an NSF
occurred. Small banks were less likely than other banks to charge a transfer fee. Transfer fees on linked-
account programs ranged from $1 to $25, and the median transfer fee was $5.
19
Multivariate regressions examining the likelihood that a bank charged any fee on its linked- account program indicated that
banks that were small, batch processed transactions starting with the smallest item, did not have an automated program, and did
not automatically cover ATM or POS/debit transactions were all associated with a lower likelihood of charging linked-account fees.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 19
Part One—Overdraft Survey IV. Overdraft Fees and Credit Limits
Table IV-9
Fees for Linked-Account Overdraft Programs
Dollar Amounts
Number of Study Population Banks
Percent of Banks with Program By Asset Size
$250 Million to
Less than Less than Greater than
All $250 Million $1 Billion $1 Billion
What is the initiation fee associated with the program?
Minimum 1.00 1.00 3.00 12.00
Mean 8.98 7.40 13.25 12.00
Median 5.00 5.00 10.00 12.00
Maximum 30.00 25.00 30.00 12.00
Total with linked accounts with fee greater than 0 27 19 6 1
Percent of banks with linked accounts 3.7 3.8 4.4 1.2
What is the maintenance fee to maintain the program?
Minimum 12.00 NA 16.00 12.00
Mean 26.58 NA 16.00 29.00
Median 35.00 NA 16.00 36.00
Maximum 36.00 NA 16.00 36.00
Total with linked accounts with fee greater than 0 9 NA 2 7
Percent of banks with linked accounts 1.2 NA 1.1 8.6
For the institution’s linked accounts and lines of credit programs, what is the fee to transfer or advance funds?
Minimum 1.00 1.00 1.00 1.00
Mean 5.17 4.89 4.73 6.86
Median 5.00 5.00 5.00 5.00
Maximum 25.00 25.00 15.00 25.00
Total with linked accounts with fee greater than 0 358 222 79 57
Percent of banks with linked accounts 49.2 44.3 54.5 70.4
Memo Item(s):
Total with linked accounts 728 502 144 81
100.0 100.0 100.0 100.0
Note: NA = not applicable.
The majority (58.8 percent) of the 352 banks that reported charging usage fees for transfers to cover
NSF activity in linked accounts assessed the fees on a per-daily occurrence basis rather than a per-item
basis (see Table IV-10). Only 6.2 percent of banks operating linked-account programs indicated that
usage fees varied with the number of NSF transactions.20 Survey comments indicated that some banks
charged a fee for transfers above a preset number. Other banks reported a general policy of capping the
total NSF-related usage fees that a customer could incur.
20
All banks offering the program were asked if the usage fee varied with NSF activity, including banks reporting a transfer fee
equal to zero, since banks could have a fee schedule that charged no transfer fee below some threshold level of NSF activity.
FDIC StuDy oF Bank overDraFt ProgramS n novemBer 2008 20
Part One—Overdraft Survey IV. Overdraft Fees and Credit Limits
Table IV-10
Features of Linked-Account Transfer Fees
Number of Study Population Banks a
Percent of Column Total By Asset Size
$250 Million to
Less than $250 Less than $1 Greater than
All Million Billion $1 Billion
How are overdraft items charged?
No transfer fee 369 280 66 23
50.7 55.7 45.6 28.4
Charged per daily occurrence 207 130 48 29
28.5 26.0 33.3 35.8
Charged on a per-item basis 145 92 27 26
20.0 18.3 18.9 32.1
Item(s) not reported 6 0 3 3
0.9 0.0 2.2 3.7
Total with linked accounts 728 502 144 81
100.0 100.0 100.0 100.0
Does the per item/occurrence fee change with the number of
items/occurrences with insufficient funds?
No 682 464 140 79
93.8 92.4 96.7 97.5
Yes 45 38 5 2
6.2 7.6 3.3 2.5
Total with linked accounts 728 502 144 81
100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
IV.3. Fees, APRs, and Credit Limits on Overdraft LOCs
This section examines the fees, interest rates, and credit limits on overdraft LOCs operated by 587 of the
banks in the study population. As discussed earlier, overdraft LOCs are credit facilities that advance
funds to cover NSF activity for a contractual APR.
More than half (59.2 percent) of banks with overdraft LOCs did not charge initiation, maintenance, or
usage fees for the service (see Table IV-11). For these institutions, the cost of overdraft coverage was the
interest charged on actual funds advanced. Small banks were somewhat less likely than large banks to
charge any of the three noninterest fees, as were banks that did not also operate an automated overdraft
program and banks whose LOC program did not automatically cover ATM or POS/debit transactions.
The share of small banks that reported charging at least one noninterest fee on their overdraft LOC
program was 36.5 percent, compared with 51.2 percent of large banks.
A small minority (10.3 percent) of banks with overdraft LOCs charged an initiation fee to establish the
program for a customer. Where charged, initiation fees ranged from $5 to $200. Among banks charging
these fees, the median initiation fee was $25 (mean of $30.32) (see Table IV-12). Maintenance fees were
the most common noninterest fee associated with overdraft LOCs. Almost 29 percent of the 587 banks
in the study population with overdraft LOCs charged periodic maintenance fees.21 Maintenance fees
charged for overdraft LOCs ranged from $10 to $200 dollars, as measured on an annual basis.
21
Several institutions indicated that customers were offered a choice between a maintenance fee and a usage fee on their
overdraft LOC. Because the responses for these banks contained both a nonzero maintenance fee and a nonzero usage fee, they
were counted as charging both fees in the cross-tabulations on noninterest fees charged.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 21
Part One—Overdraft Survey IV. Overdraft Fees and Credit Limits
Table IV-11
The Incidence of Noninterest Fees Charged by Overdraft LOC Programs
By Presence
Number of Study Population Banksa of Automated By Transactions
Percent of Column Total By Asset Size Overdraft Program Covered
Less $250 Has No Does Not
than Million to Greater Automated Automated Cover ATM Covers
What types of fees are charged by $250 Less than than $1 Overdraft Overdraft or POS/ ATM or
your institution? All Million $1 Billion Billion Program Program Debit POS/Debit
None of the three fees 348 234 74 40 121 227 46 302
59.2 63.5 54.8 47.6 47.7 68 72.7 57.6
Only initiation fee 5 4 2 0 2 4 0 5
0.9 1.0 1.2 0.0 0.6 1.2 0.0 1.0
Only maintenance 106 61 22 22 62 44 2 104
18.0 16.7 16.7 26.2 24.4 13.2 3.2 19.8
Only usage fee 56 23 21 12 34 22 10 46
9.5 6.3 15.5 14.3 13.6 6.4 16.4 8.7
Maintenance and usage fees 16 8 3 5 15 1 2 14
2.7 2.1 2.4 6.0 5.9 0.3 2.6 2.7
Initiation and usage fees 8 8 0 0 0 8 0 8
1.3 2.1 0.0 0.0 0.0 2.3 0.0 1.5
Maintenance and initiation fees 40 27 10 4 15 25 3 37
6.9 7.3 7.1 4.8 6.1 7.5 5.1 7.1
All three fees 7 4 3 0 3 4 0 7
1.2 1.0 2.4 0.0 1.3 1.2 0.0 1.3
Item(s) not reported 1 0 0 1 1 0 0 1
0.2 0.0 0.0 1.2 0.4 0.0 0.0 0.2
Total with overdraft LOC programs 587 368 135 84 253 334 63 524
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
Among banks that assessed this type of fee, the median annualized maintenance fee was $25 (mean of
$26.41). Small institutions were less likely to charge maintenance fees on overdraft LOCs than large
institutions, but small institutions were more likely to charge initiation fees (see Table IV-11). Both
initiation and maintenance fees were assessed, regardless of a customer’s actual overdraft activity.
Almost 15 percent of banks that operated overdraft LOCs assessed a usage fee when funds were
advanced, in addition to charging interest on the credit extended. Usage-related noninterest fees ranged
from $1 to $25 and were more likely to be assessed on a daily occurrence basis (44 institutions) than on a
per-item basis (25 institutions) (data not reported in tables).22 Where charged, the median noninterest
usage fee for overdraft LOCs was $5 (mean of $6.65). Large banks tended to have somewhat higher
usage fees (see Table IV-12).
The annual percentage interest rate reported by banks for overdraft LOC usage ranged from 6.0 percent
to 21.0 percent per year. The median APR on overdraft LOCs reported by the study population was 18.0
percent (mean of 16.4 percent) (see Table IV-13). There was little variation in APRs on overdraft LOCs
across bank asset-size groups.23
22
Information on how usage-related noninterest advance fees on overdraft LOCs were charged was missing for the remaining
18 banks that reported positive fees.
23
Multivariate regressions including categorical variables classifying banks in terms of size, other programs offered, batch-
processing mode, and whether the overdraft LOC program covered ATM or POS/debit transactions as explanatory variables indi-
cated that only transactions covered by the overdraft LOC program were systematically related to the APR of the program.
Specifically, banks having overdraft LOC programs that did not automatically cover ATM or POS/debit transactions had lower
APRs on credit extended under these programs, controlling for the other factors.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 22
Part One—Overdraft Survey IV. Overdraft Fees and Credit Limits
Table IV-12
Noninterest Fees Charged by Overdraft LOC Programs
Dollar Amounts
Number of Study Population Banks
Percent of Banks with Program By Asset Size
$250 Million to
Less than $250 Less than $1 Greater than
All Million Billion $1 Billion
What is the initiation fee associated with the program?
Minimum 5.00 5.00 12.00 10.00
Mean 30.32 23.18 50.56 32.50
Median 25.00 25.00 25.00 30.00
Maximum 200.00 50.00 200.00 60.00
Total with LOC with fee greater than 0 61 42 14 4
Percent of banks with overdraft LOC programs 10.3 11.5 10.7 4.8
What is the maintenance fee to maintain the program? (annual basis)
Minimum 10.00 12.00 12.00 10.00
Mean 26.41 23.35 33.38 27.61
Median 25.00 25.00 25.00 25.00
Maximum 200.00 50.00 200.00 100.00
Total with LOC with fee greater than 0 169 100 38 31
Percent of banks with overdraft LOC programs 28.8 27.1 28.6 36.9
For the institution’s linked accounts and lines of credit programs, what is the fee to transfer or advance funds?
Minimum 1.00 1.00 1.00 2.00
Mean 6.65 6.04 5.79 9.39
Median 5.00 5.00 5.00 5.50
Maximum 25.00 10.00 25.00 25.00
Total with LOC with fee greater than 0 87 42 27 18
Percent of banks with overdraft LOC programs 14.9 11.5 20.2 21.4
Memo Item(s):
Total with overdraft LOC programs 587 368 135 84
100.0 100.0 100.0 100.0
Table IV-13
APRs for Overdraft LOC Programs
Dollar Amounts
Number of Study Population Banks
Percent of Banks with Program By Asset Size
$250 Million to
For the institution’s lines of credit program, what is the typical Less than Less than Greater than
APR on the outstanding balance? All $250 Million $1 Billion $1 Billion
Minimum 6.00 8.00 6.00 6.00
Mean 16.38 16.41 16.46 16.09
Median 18.00 18.00 18.00 17.99
Maximum 21.00 21.00 21.00 21.00
Total reporting APRs 572 357 133 82
Percent of banks with overdraft LOC programs 97.4 96.9 98.8 97.6
Memo Item(s):
Total with overdraft LOC programs 587 368 135 84
100.0 100.0 100.0 100.0
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 23
Part One—Overdraft Survey IV. Overdraft Fees and Credit Limits
Table IV-14
Credit Limits of Overdraft LOC Programs
Dollar Amounts
Number of Study Population Banks
Percent of Banks with Program By Asset Size
$250 Million to
If your institution has adopted written policies and specified a Less than Less than Greater than
cap on advances, what is the dollar limit? All $250 Million $1 Billion $1 Billion
Minimum 300.00 300.00 500.00 500.00
Mean 8,211.11 5,203.85 9,484.38 13,662.77
Median 5,000.00 4,000.00 5,000.00 5,000.00
Maximum 100,000.00 25,000.00 100,000.00 100,000.00
Total with overdraft LOC programs with written limitsa 194 100 51 43
Percent of banks with program 33.1 27.1 38.1 51.2
Memo Item(s):
Total with overdraft LOC programs 587 368 135 84
100.0 100.0 100.0 100.0
a
Summary statistics reflect data for banks with written policies, where the policies stipulate a written limit.
Only about one-third of banks operating overdraft LOCs reported credit limits in their written poli-
cies.24 Small banks were less likely to have limits specified in written policies than large banks (see
Table IV-14). Where specified, overdraft LOC credit limits ranged from $300 to $100,000, with a
median limit of $5,000. Small banks had a somewhat lower median credit limit on overdraft LOC
programs ($4,000) than large banks ($5,000).
IV.4. Summary
For almost all study population banks operating an automated overdraft program, the main fee associated
with the program was an NSF usage fee. Usage fees reported by these banks ranged from $10 to $38; the
median fee was $27, charged on a per-transaction basis in almost all cases. In this context, a $27 fee
charged for a single advance of $60 that was repaid in two weeks roughly translated into an APR of
1,173 percent. Many surveyed banks (24.6 percent) assessed additional fees on accounts that remained
in negative balance status in the form of flat fees or interest charged on a percentage basis.
Fees assessed for linked-account and overdraft LOC programs were generally lower than for automated
overdraft programs. Almost half of the study population banks with linked-account programs did not
charge explicit fees for the service. The most common fee associated with linked-account programs was
a transfer fee; where charged, the median fee was $5. The primary cost associated with overdraft LOCs
was the interest charged on funds advanced, usually accruing at an APR of around 18 percent.
Most banks in the study population that operated automated overdraft programs (73 percent) estab-
lished coverage limits for customers in written policies, consistent with a bank’s lending program. Maxi-
mum automated overdraft coverage limits stipulated in these policies ranged from $85 to $10,000, and
the median credit limit was $500. In contrast, among banks with written policies establishing credit
limits on overdraft LOCs, the median limit was $5,000.
24
Compared with large banks, small banks were less likely to have written policies. Small banks were also less likely to specify
credit limits for overdraft LOCs.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 24
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
V. Customer Enrollment, Marketing, and
Disclosure Practices
Institutions were asked a wide range of questions regarding how customers are enrolled in overdraft
programs and how the overdraft programs and practices are marketed and disclosed to consumers.25
This section discusses how banks determine which overdraft program to offer new customers, whether
customers were given the opportunity to opt in or opt out of the program, how and what comparative
and educational information was provided, and when and how customers were informed of various over-
draft programs and features. In addition, this section discusses whether account and coverage limits for
overdraft programs were displayed at ATMs, and when customers were notified of insufficient funds
available at ATMs and POS/debit terminals.
Regarding automated overdraft programs, a number of questions in this section did not apply to nonpro-
moted automated programs; by definition, nonpromoted programs are not offered or advertised to
customers. As previously reported in Section II, 8.5 percent of study population banks operating nonpro-
moted automated programs held more than half (51.7 percent) of the transaction account dollars main-
tained in study population banks. Therefore, some of the marketing and survey disclosure results
presented in this section may not apply to a significant number of customers covered by nonpromoted
automated programs. Questions regarding opt-in and opt-out features of an overdraft program, compara-
tive and educational information, and the notification of NSFs at ATMs and POS/debit terminals
applied to both promoted and nonpromoted automated programs.
V.1. Offering Overdraft Programs to New Customers
Surveyed institutions were asked about the methods used to determine which overdraft programs to offer
new customers. This question was most relevant to 584 study population banks that operated more than
one type of overdraft program, and therefore had to decide which or how many programs to offer. Of
those institutions, 45.5 percent reported offering all programs available, and 19.3 percent offered only
promoted automated programs unless the customer specifically requested alternative overdraft options
(see Table V-1). Almost one-third (31.7 percent) of institutions that operated more than one type of
overdraft program had some “other” way of determining which program to offer. Some of the institutions
that responded that they used “other” methods noted only offering an overdraft program upon a custom-
er’s request, offering different programs depending on the type of account, or giving bank employees
discretion as to program choice.
Institutions were asked what rules and procedures were used to determine whether a customer qualified
for a program, including whether customers were subjected to credit checks or were required to have a
minimum balance in their account. Banks were also asked if account age or the customer’s history with
the institution, recurring deposit activity, or some other qualification criteria were used to determine if a
customer was eligible for an overdraft program.
As Table V-2 shows, among study population institutions with automated overdraft programs, the most
common rules used to determine if a customer qualified for an overdraft program were the age of the
customer’s account (71.6 percent) and the customer’s history with the institution (60.1 percent). These
results were consistent across asset-size groups. In the case of study population banks with linked-account
programs, the most common response was to use “other” qualification criteria; the majority of those insti-
tutions clarified that there were no special qualification criteria for a customer to establish a linked
25
The discussion in Sections V though VII of this study focus on overdraft services through automated programs, linked
accounts, and LOCs.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 25
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
Table V-1
How Institutions with Two or More Overdraft Programs Determine Offerings to New Customers
Number of Study Population Banksa
Percent of Column Total By Asset Size
$250 Million to
How did your institution determine which overdraft program to Less than Less than Greater than
offer new customers? All $250 Million $1 Billion $1 Billion
Offers all programs available 266 169 61 36
45.5 49.4 40.0 40.0
Offers only promoted automated program unless customer 113 50 40 23
requests other options 19.3 14.6 26.3 25.6
Uses software to determine which customers are offered 12 0 6 6
programs 2.1 0.0 4.2 6.7
Other 185 115 45 25
31.7 33.7 29.5 27.8
Item(s) not reported 8 8 0 0
1.4 2.3 0.0 0.0
Total with two or more overdraft programsb 584 342 152 90
100.0 100.0 100.0 100.0
Memo Item(s): Number of banks with one or no overdraft 587 510 59 18
program
Percent of study population banks 50.1 59.9 28.0 16.7
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Banks with two or more overdraft programs are those that operate at least two of the following: promoted automated overdraft programs, nonpromoted automated overdraft programs, linked account
programs, or overdraft LOC programs.
Table V-2
Customer Qualification Rules for Automated Overdraft Programs
Number of Study Population Banksa All Banks with Linked
Percent of Column Total By Asset Size Accounts or LOC Programs
Which rules were used by your
institution to determine if customer $250 Million
qualifies for program? b Less than to Less than Greater than All Linked
(Multiple answers allowed) All $250 Million $1 Billion $1 Billion Accounts All LOCs
Credit check 77 46 19 12 78 538
16.3 18.2 14.0 14.5 10.7 91.7
Minimum balance 157 96 34 27 117 84
33.0 37.9 24.4 32.5 16.1 14.3
Age of account 339 176 101 62 126 171
71.6 69.7 73.3 74.7 17.4 29.2
History with bank 285 146 83 56 198 302
60.1 57.6 60.5 67.5 27.3 51.5
Recurring deposit 121 65 30 25 41 81
25.5 25.8 22.1 30.1 5.7 13.9
Other 164 88 48 28 380 88
34.7 34.8 34.9 33.7 52.2 15.0
Total with program 474 253 138 83 728 587
100.0 100.0 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Percentage shares do not sum to 100.0 percent because all answers which apply are included.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 26
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
Table V-3
Whether Opt-In/Opt-Out
Number of Study Population Banks a
Percent of Column Total
Did customers opt­in or opt­out of your
institution’s program, or was the option not All Automated Promoted Nonpromoted All Linked
available? Overdraft Program Automated Automated Accounts
Opt-in 53 53 NA 689
11.1 14.1 0.0 94.7
Opt-out 356 311 45 17
75.1 83.3 44.6 2.4
Otherb 65 10 56 21
13.7 2.6 55.4 2.9
Total with program 474 374 100 728
100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Of the 65 institutions that reported “Other,” 26 described in comments that neither the opt-in nor opt-out option was available.
Note: NA = not applicable.
account, apart from having two or more accounts with the institution. The dominant qualification
criteria for overdraft LOC programs, which commonly require underwriting, was a positive credit check
result (91.7 percent).
V.2. Enrollment in Overdraft Programs
Surveyed banks were asked whether the automated overdraft program or linked-account policies
required customers to affirmatively enroll in the program (opt in) to participate, allowed customers who
were automatically enrolled to request removal from the program (opt out), or followed some other
policy. As shown in Table V-3, most study population banks with automated programs (75.1 percent)
featured opt-out programs, while 11.1 percent featured opt-in programs. A portion of banks that
responded that they followed some other policy (26 of the 65 banks) commented that customers were
not given the choice to opt in or out of the automated program. There were no significant patterns
across size groups for these results.
Study population institutions with promoted automated programs were far more likely (83.3 percent)
than institutions with nonpromoted programs (44.6 percent) to follow an opt-out policy. Bank comments
indicated that study population banks with nonpromoted automated programs were much more likely
than those with promoted programs to not give customers the option to opt in or out of the automated
overdraft program. In contrast, the large majority of banks with linked-account programs (94.7 percent)
followed an opt-in policy (see Table V-3).
V.3. Providing Comparative and Educational Information to Consumers
Surveyed institutions were asked whether and how consumers were provided comparative information
about the features and costs of alternative types of overdraft programs, as well as educational informa-
tion to help the customer use overdraft coverage wisely and efficiently. The survey did not collect infor-
mation on the quality or effectiveness of information and disclosures provided to customers.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 27
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
On average, 63.1 percent of institutions with more than one type of overdraft program provided compar-
ative information about program features and costs to consumers (see Table V-4). Less than one-third of
the institutions (28.8 percent) with at least one type of formal overdraft program reported providing
educational information (see Table V-5).
Table V-4
Information Provided to Consumers to Compare Overdraft Programs
at Institutions with Two or More Overdraft Programs
Number of Study Population Banksa By Overdraft Programs
Percent of Column Total By Asset Size Offered
$250 Million Automated
Did your institution provide Less than to Less than Greater than and Other Linked and
comparative information? All $250 Million $1 Billion $1 Billion Programs LOC Only
No 215 127 61 28 142 73
36.9 37.1 40.0 31.1 37.5 35.9
Yes 368 215 91 62 237 131
63.1 62.9 60.0 68.9 62.5 64.1
Total with two or more programsc 584 341 152 90 379 204
100.0 100.0 100.0 100.0 100.0 100.0
If yes, all types of information that applyb (Multiple answers allowed)
Deposit account agreement 137 73 30 34 95 43
37.3 33.9 33.3 54.8 39.9 32.6
Brochure about accounts 207 111 56 40 153 55
56.3 51.8 61.4 64.5 64.3 41.8
Information provided by bank 282 157 77 48 185 97
personnel 76.7 73.2 84.2 77.4 78.0 74.1
Information provided only when 46 38 5 3 22 25
asked 12.5 17.9 5.3 4.8 9.1 18.8
Other 38 4 18 17 34 5
10.5 1.8 19.3 27.4 14.2 3.7
Total with two or more programs that 368 215 91 62 237 131
provide information 100.0 100.0 100.0 100.0 100.0 100.0
If yes, all information combinations
Only source of information is written 21 12 3 6 15 5
materials 5.6 5.4 3.5 9.7 6.4 4.2
Only source of information is bank 77 50 16 11 39 38
personnel 20.9 23.2 17.5 17.7 16.4 29.1
Other 5 0 3 2 5 0
1.4 0.0 3.5 3.2 2.2 0.0
Multiple sources of information 219 115 64 40 156 63
provided 59.5 53.6 70.2 64.5 65.9 48.0
Information provided only when 46 38 5 3 22 25
asked 12.5 17.9 5.3 4.8 9.1 18.8
Total with two or more programs that 368 215 91 62 237 131
provide information 100.0 100.0 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Percentage shares do not sum to 100.0 percent because all answers that apply are included.
c
Banks with two or more overdraft programs are those that operate at least two of the following: promoted automated overdraft programs, nonpromoted automated overdraft programs, linked account
programs, or overdraft LOC programs.
FDIC StuDy oF Bank overDraFt ProgramS n novemBer 2008 28
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
Table V-5
Educational Information Provided to Consumers by Institutions with Formal Overdraft Programs
By Overdraft
Number of Study Population Banksa Programs By Type of By Transactions
Percent of Column Total By Asset Size Offered Automated Program Covered
Does Not
Less $250 Linked Cover Covers
than Million to Greater Offers and/or ATM or ATM or
Did your institution provide $250 Less than than $1 Auto- LOC Non- POS/ POS/
educational information? All Million $1 Billion Billion mated Only promoted Promoted Debit Debit
No 716 537 119 61 256 461 69 186 92 625
71.2 76.5 59.2 58.7 53.9 86.6 69.2 49.9 78.1 70.3
Yes 290 165 82 43 218 71 31 187 26 264
28.8 23.5 40.8 41.3 46.1 13.4 30.8 50.1 21.9 29.7
Total with formal overdraft 1,006 702 200 104 474 532 100 374 118 889
program(s)c 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Memo item(s): Number of banks 165 150 11 4 0 0 0 0 52 113
that have no formal program
Percent of study population banks 14.1 17.6 5.3 3.7 0.0 0.0 0.0 0.0 30.8 11.2
If yes, all types of information that apply b (Multiple answers allowed)
Comparison chart 32 15 10 7 32 0 6 26 5 27
11.0 9.3 11.8 16.3 14.6 0.0 19.4 13.9 21.1 10.1
Fee sheets 154 88 43 23 100 54 17 83 20 135
53.3 53.5 52.9 53.5 45.8 76.3 55.1 44.3 77.3 51.0
Examples of costs 50 27 16 7 38 7 2 36 5 45
17.2 16.3 19.6 16.3 17.6 9.9 6.5 19.4 18.8 17.1
Overdraft protection brochure 149 81 48 20 134 15 10 124 9 140
51.3 48.8 58.8 46.5 61.2 21.1 31.3 66.1 35.1 52.9
Other 117 61 32 24 92 26 5 27 1 116
40.5 37.2 39.2 55.8 42.1 35.9 17.6 14.2 3.9 44.1
Total with formal overdraft 290 165 82 43 218 71 31 187 26 264
program(s) that provide educa- 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
tional information
If yes, all information combinations
Only fee sheets 43 31 8 4 11 32 4 7 12 31
14.7 18.6 9.8 9.3 5.1 44.4 13.6 3.6 46.1 11.7
Only brochure 58 35 18 6 57 2 8 49 5 53
20.1 20.9 21.6 14.0 25.9 2.2 24.8 26.1 18.8 20.2
Other 55 31 14 10 44 12 6 37 1 54
19.0 18.6 17.6 23.3 20.0 16.1 20.1 20.0 3.9 20.5
Multiple sources of information 134 69 42 23 107 27 13 94 8 126
provided 46.2 41.9 51.0 53.5 49.1 37.3 41.5 50.3 31.2 47.6
Total with formal overdraft 290 165 82 43 218 71 31 187 26 264
program(s) that provide educa- 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
tional information
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Percentage shares do not sum to 100.0 percent because all answers that apply are included.
c
Results include all institutions that offered at least one type of overdraft protection program.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 29
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
V.3.A. Comparative Information Provided
As mentioned, the majority of study population banks that had more than one type of overdraft program
provided comparative information about program features and costs to consumers. Close to 60 percent
of these institutions used multiple means to provide comparative information to consumers. A large
majority used bank personnel to communicate the information (76.7 percent) or provided account
brochures (56.3 percent). More than one-third of the institutions (37.3 percent) provided information
via the deposit account agreement. Banks with overdraft programs that included automated programs
were somewhat more likely than those with no automated overdraft program (i.e., operated only linked-
accounts, overdraft LOCs, or both) to use multiple sources to provide comparative information to
consumers (65.9 percent versus 48.0 percent). A minority of institutions in the study reported providing
comparative information only when asked (12.5 percent). This was more common at small banks
(17.9 percent) than at medium and large banks (5.3 percent and 4.8 percent, respectively).
V.3.B. Educational Information Provided
Institutions were also asked if educational materials were provided to help customers use overdraft
coverage wisely or efficiently. As shown in Table V-5, among the 1,006 institutions in the study with
formal overdraft programs, almost one-third (28.8 percent) offered educational information. Large and
medium banks were more likely to provide educational materials than small banks (about 41 percent for
large and medium banks, compared with 23.5 percent for small banks). Among the 474 study population
banks with automated overdraft programs, those that had promoted programs (374 banks) were more
likely to provide educational materials than those operating nonpromoted automated programs (50.1
percent versus 30.8 percent). Banks that covered ATM or POS/debit transactions were more likely to
provide educational information than banks that did not cover such transactions (29.7 percent versus
21.9 percent). Of study population institutions that distributed educational information, 46.2 percent
used multiple methods to provide the material. The most common methods were fee sheets (53.3
percent), brochures (51.3 percent), or some “other” method (40.5 percent).26 Relatively fewer institu-
tions provided comparison charts (11.0 percent) or examples of costs involved in using overdraft
programs (17.2 percent).
V.4. Product Line Information Provided to Consumers
The study yielded information on how the type and content of information provided to consumers
differed by product line. Surveyed institutions were asked when and how banks informed customers
about promoted automated overdraft programs, linked accounts, and overdraft LOC programs, as well as
which program features were discussed with customers.27 As mentioned, the survey did not collect infor-
mation on the quality or effectiveness of information and disclosures provided to customers.
V.4.A. When Information Was Provided
As reported in Table V-6, most institutions (82.1 percent) with promoted automated overdraft programs
informed customers about the program at the point of account opening. Slightly more than half of insti-
tutions with promoted programs informed customers about the program upon request (52.1 percent),
and 26.1 percent informed customers periodically with account updates. An additional 16.5 percent
informed customers using some “other” method. There were no notable patterns across institutions by
size group.
26
Additional common methods of offering educational information included other types of disclosures, policies, product guides,
general account- or bank-related brochures or letters, and direct communication with bank employees.
27
Questions about information provided to customers were not asked of institutions operating nonpromoted automated
programs as these programs, by definition, are not revealed to customers in advance.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 30
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
Table V-6
Timing of Information Provided to Consumers for Promoted Automated Programs
Number of Study Population Banksa
Percent of Column Total By Asset Size
$250 Million to
Less than Less than Greater than
When did your institution inform its customers of the program? All $250 Million $1 Billion $1 Billion
All instances that apply b (Multiple answers allowed)
When account is opened 307 176 91 39
82.1 83.6 80.3 79.6
Periodically with account updates 97 58 29 11
26.1 27.3 25.4 22.4
When asked by customers 195 100 72 23
52.1 47.3 63.4 46.9
Customers are not informed NA NA NA NA
NA NA NA NA
Other 62 23 26 13
16.5 10.9 22.5 26.5
Total with promoted automated 374 211 114 49
100.0 100.0 100.0 100.0
All combinations
Only when account is opened 109 77 22 10
29.2 36.4 19.7 20.4
Only when asked 15 8 6 1
4.0 3.6 5.6 2.0
Only with periodic account updates 5 4 0 1
1.3 1.8 0.0 2.0
Only at other times 28 12 8 8
7.4 5.5 7.0 16.3
Customers are not informed 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0
Informed at multiple times 217 111 77 29
58.1 52.7 67.6 59.2
Total with promoted automated 374 211 114 49
100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Percentage shares do not sum to 100.0 percent because all answers that apply are included.
Note: NA = not applicable
Although the majority (58.1 percent) of the 374 study population institutions with promoted automated
programs used several methods to inform customers about overdraft programs at various points in time,
41.9 percent of banks used only one method. Twenty-nine percent of study population banks informed
customers only at account opening. This was more common at small banks (36.4 percent), as compared
with medium and large banks (approximately 20.0 percent). Four percent of study population banks
informed customers about overdraft programs only when a customer asked.
In the case of linked accounts and overdraft LOCs, 61.9 percent of banks with linked accounts and 60.2
percent of banks with overdraft LOCs notified customers of the programs at account opening (see Table
V-7). For both program types, large banks were the most likely to notify customers at account opening.
About one in three institutions with linked-account and overdraft LOC programs (30.7 percent and
34.9 percent, respectively) informed customers of the programs only if asked.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 31
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
Table V-7
Timing of Information Provided to Consumers for Linked-Account and Overdraft LOC Programs
Number of Study Population Banksa
Percent of Column Total Banks with Linked Accounts by Asset Size Banks with LOCs by Asset Size
Less than $250 Million Greater $250 Million Greater
When did your institution inform its All Linked $250 to Less than than All Less than to Less than than $1
customers of the program? Accounts Million $1 Billion $1 Billion LOCs $250 Million $1 Billion Billion
All instances that apply b (Multiple answers allowed)
When account is opened 450 307 87 57 353 207 85 61
61.9 61.1 60.0 70.4 60.2 56.2 63.1 72.6
Periodically with account updates 74 46 14 14 64 38 16 10
10.2 9.2 10.0 17.3 11.0 10.4 11.9 11.9
When asked by customers 562 380 117 65 480 299 117 64
77.2 75.6 81.1 80.2 81.8 81.2 86.9 76.2
Customers are not informed 20 15 3 1 0.0 0.0 0.0 0.0
2.7 3.1 2.2 1.2 0.0 0.0 0.0 0.0
Other 88 58 16 14 69 46 14 9
12.0 11.5 11.1 17.3 11.8 12.5 10.7 10.7
Total with program 728 502 144 81 587 368 135 84
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
All combinations
Only when account is opened 118 84 21 13 70 42 13 15
16.2 16.8 14.4 16.1 11.9 11.5 9.5 17.9
Only when asked 223 153 50 20 205 142 45 18
30.7 30.5 34.4 24.7 34.9 38.5 33.3 21.4
Only with periodic account updates 1 0 0 1 16 12 0 4
0.1 0.0 0.0 1.2 2.6 3.1 0.0 4.8
Only at other times NA NA NA NA 293 173 74 47
NA NA NA NA 50.0 46.9 54.8 56.0
Customers are not informed 20 15 3 1 NA NA NA NA
2.7 3.1 2.2 1.2 NA NA NA NA
Informed at multiple times 366 249 71 46 3 0 3 0
50.3 49.6 48.9 56.8 0.5 0.0 2.4 0.0
Total with program 728 502 144 81 587 368 135 84
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Percentage shares do not sum to 100.0 percent because all answers that apply are included.
Note: NA = not applicable.
V.4.B. How Information Was Provided
Study population banks used a variety of methods to provide customers with information about available
overdraft programs (see Table V-8), and many banks (67.2 percent) used more than one method. About
two-thirds of the institutions used bank personnel to inform customers about the features of promoted
overdraft programs; slightly more than half (55.1 percent) used account brochures; 46.2 percent used
letters or other special mailings; and 40.2 percent used deposit account agreements. Banks that used
third-party vendors to administer their promoted automated programs were more likely to have multiple
means of keeping customers informed; 78.1 percent of institutions with vendors used more than one
method, compared with 51.2 percent of institutions that did not use vendors.
Approximately one-third (32.8 percent) of study population banks with promoted automated programs
used only one method to provide information to customers. For these banks, letters or other special
customer mailings and brochures were the most common methods used (14.7 percent).
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 32
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
Table V-8
Means of Informing Consumers about Promoted Automated Programs
Number of Study Population Banksa
Percent of Column Total By Asset Size By Vendor Use
With what means did your institution $250 Million
inform customers of the features of Less than to Less than Greater than Does Not Use
the program? All $250 Million $1 Billion $1 Billion Vendor Uses Vendor
All instances that apply (Multiple answers allowed)
b
Deposit account agreement 150 84 45 21 55 96
40.2 40.0 39.4 42.9 35.8 43.2
Brochure about accounts 206 107 66 33 70 136
55.1 50.9 57.7 67.3 46.3 61.2
Bank personnel 254 146 77 31 91 163
67.9 69.1 67.6 63.3 59.6 73.6
Letter or special mailing 173 96 58 19 44 129
46.2 45.5 50.7 38.8 28.6 58.2
Other 38 12 16 10 16 22
10.0 5.5 14.1 20.4 10.3 9.9
Total with promoted automated 374 211 114 49 152 222
100.0 100.0 100.0 100.0 100.0 100.0
All combinations
Only through deposit account 24 19 5 0 11 13
agreement 6.4 9.1 4.2 0.0 7.1 5.9
Only through letter, special mailing, 55 27 19 9 35 20
or brochure 14.7 12.7 16.9 18.4 22.9 9.2
Only by bank personnel 29 27 2 1 21 9
7.9 12.7 1.4 2.0 13.7 3.9
Only by other means 14 4 6 4 8 6
3.8 1.8 5.6 8.2 5.1 2.9
Informed at multiple times 251 134 82 35 78 173
67.2 63.6 71.8 71.4 51.2 78.1
Total with promoted automated 374 211 114 49 152 222
100.0 100.0 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Percentage shares do not sum to 100.0 percent because all answers that apply are included.
Survey results showed that study population banks with linked accounts or overdraft LOCs used fewer
means of informing customers about program features (see Table V-9). The most common means of
providing information about linked accounts and overdraft LOCs was through bank personnel (83.4
percent and 80.5 percent, respectively). Banks with linked accounts or overdraft LOCs were less likely
than those with promoted automated overdraft programs to use deposit account agreements or account
brochures to provide such information. These institutions were also much less likely to use a letter or
special mailing (4.7 percent of institutions with linked accounts and 5.6 percent of institutions with
overdraft LOCs, versus 46.2 percent for institutions with promoted programs). A fair percentage of
study population banks relied solely on bank personnel to provide information about these types of
programs to customers (41.8 percent of banks with linked accounts and 28.8 percent of banks with
overdraft LOCs).
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 33
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
Table V-9
Means of Informing Consumers about Linked-Account and Overdraft LOC Programs
Number of Study Population Banksa
Percent of Column Total Banks with Linked Accounts by Asset Size Banks with LOCs by Asset Size
With what means did your institution Less than $250 Million Greater $250 Million Greater
inform customers of the features of All Linked $250 to Less than than $1 All Less than to Less than than $1
the program? Accounts Million $1 Billion Billion LOCs $250 Million $1 Billion Billion
All instances that apply b (Multiple answers allowed)
Deposit account agreement 240 146 51 43 160 96 32 32
33.0 29.0 35.6 53.1 27.3 26.0 23.8 38.1
Brochure about accounts 194 127 47 21 213 115 63 35
26.7 25.2 32.2 25.9 36.2 31.3 46.4 41.7
Bank personnel 607 426 115 66 472 307 103 63
83.4 84.7 80.0 81.5 80.5 83.3 76.2 75.0
Letter or special mailing 34 23 6 5 33 19 5 9
4.7 4.6 4.4 6.2 5.6 5.2 3.6 10.7
Customer not informed 39 27 10 3 NA NA NA NA
5.4 5.3 6.7 3.7 NA NA NA NA
Other 60 31 21 8 133 81 34 19
8.2 6.1 14.4 9.9 22.7 21.9 25.0 22.6
Total with program 728 502 144 81 587 368 135 84
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
All combinations
Only through deposit account 30 15 6 8 22 15 2 5
agreement 4.1 3.1 4.4 9.9 3.7 4.2 1.2 6.0
Only through letter, special mailing or 13 8 5 1 22 12 6 4
brochure 1.9 1.5 3.3 1.2 3.7 3.1 4.8 4.8
Only by bank personnel 304 234 48 22 169 123 32 14
41.8 46.6 33.3 27.2 28.8 33.3 23.8 16.7
Only by other means 21 12 6 3 49 31 10 9
2.9 2.3 4.4 3.7 8.4 8.3 7.1 10.7
Customer not informed 39 27 10 3 NA NA NA NA
5.4 5.3 6.7 3.7 NA NA NA NA
Informed at multiple times 320 207 69 44 320 188 80 52
44.0 41.2 47.8 54.3 54.5 51.0 59.5 61.9
Item(s) not reported NA NA NA NA 5 0 5 0
NA NA NA NA 0.8 0.0 3.6 0.0
Total with program 728 502 144 81 587 368 135 84
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Percentage shares do not sum to 100.0 percent because all answers that apply are included.
Note: NA = not applicable
V.4.C. What Information Was Provided
Some of the key overdraft program features that help consumers make wise choices about overdraft
program usage include information about applicable fees, covered transactions, transaction processing
methods, applicable APRs, and coverage limits. As shown in Table V-10, nearly all study population
banks with promoted automated programs (at least 97.5 percent) informed customers about two or more
of these features. This pattern was similar across every size group. A large majority of these institutions
informed customers of the schedule of fees (95.0 percent), the available coverage limit (89.6 percent),
and information about the types of transactions covered (78.8 percent) at the time customers enrolled
or were included in the program. The majority of these institutions also provided information on how
transactions were processed (55.4 percent).
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 34
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
Table V-10
Content of Information Provided to Consumers about Promoted Automated Programs
Number of Study Population Banksa
Percent of Column Total By Asset Size By Processing Method By Transactions Covered
Which features did your institution Less $250
inform customers of when they than Million to Greater Largest- Not Smallest- Does Not Covers
enrolled or were included in the $250 Less than than $1 to- Size to- Cover ATM or ATM or
program? All Million $1 Billion Billion Smallest Related Largest POS/Debit POS/Debit
All instances that apply b (Multiple answers allowed)
Fees 355 203 106 46 105 146 104 44 311
95.0 96.4 93.0 93.9 90.8 97.8 95.6 88.4 96.0
APR 20 15 3 1 4 9 7 0 20
5.2 7.3 2.8 2.0 3.3 5.8 6.5 0.0 6.0
Transactions coverage 294 161 91 42 94 108 92 45 250
78.8 76.4 80.3 85.7 81.6 72.7 84.1 89.6 77.1
Transactions processing 207 111 69 27 73 83 51 24 183
55.4 52.7 60.6 55.1 63.0 55.9 46.7 48.6 56.5
Dollar limit covered 335 192 101 42 99 133 103 47 288
89.6 90.9 88.7 85.7 85.8 89.2 94.1 92.8 89.1
Other 28 15 6 6 4 2 22 2 26
7.4 7.3 5.6 12.2 3.5 1.1 20.3 4.0 8.0
Total with promoted automated 374 211 114 49 116 149 109 50 324
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Memo item(s): Number of banks 364 211 107 46 114 143 107 48 317
with multiple features
Percent of banks with promoted 97.5 100.0 94.4 93.9 98.3 96.1 98.5 94.8 97.9
automated program
All combinations
Only price 4 0 3 1 0 3 2 2 3
1.1 0.0 2.8 2.0 0.0 1.7 1.5 3.2 0.8
Only dollar limit 2 0 2 0 0 2 0 0 2
0.4 0.0 1.4 0.0 0.0 1.1 0.0 0.0 0.5
Only other features 4 0 2 2 2 2 0 1 3
1.0 0.0 1.4 4.1 1.7 1.1 0.0 2.0 0.8
Multiple features 364 211 107 46 114 143 107 48 317
97.5 100.0 94.4 93.9 98.3 96.1 98.5 94.8 97.9
Total with promoted automated 374 211 114 49 116 149 109 50 324
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Percentage shares do not sum to 100.0 percent because all answers that apply are included.
Banks with promoted automated programs that processed transactions by size starting with the largest
were more likely to inform customers about transaction processing methods (63.0 percent) than those
that processed transactions starting with the smallest (46.7 percent) or by non-size-related methods
(55.9 percent). Banks that covered ATM or POS/debit transactions were less likely than banks that
did not cover those transactions to provide information about which transactions were covered
(77.1 percent versus 89.6 percent).
Approximately half of institutions with linked accounts (48.7 percent) and nearly all institutions with
overdraft LOCs (92.8 percent) gave customers information about multiple program features. The major-
ity of institutions that had linked-account programs provided a schedule of fees (68.5 percent) and infor-
mation regarding transactions covered (59.3 percent). Institutions with overdraft LOCs most frequently
informed consumers about the applicable APR (89.3 percent) and the dollar limit covered (83.6
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 35
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
Table V-11
Content of Information Provided to Consumers
about Linked-Account and Overdraft LOC Programs
Number of Study Population Banksa
Percent of Column Total
Which features did your institution inform customers of Banks with Linked Banks with Overdraft
when they enrolled or were included in the program? Accounts LOC Programs
All features that apply b (Multiple answers allowed)
Fees 498 385
68.5 65.7
APR 23 524
3.1 89.3
Transactions coverage 432 339
59.3 57.7
Transactions processing 202 204
27.7 34.7
Dollar limit covered N/A 490
N/A 83.6
Other 95 30
13.1 5.1
Total with program 728 587
100.0 100.0
Memo item(s): Number of banks with multiple features 355 545
Percent of banks with promoted automated program 48.7 92.8
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Percentage shares do not sum to 100.0 percent because all answers that apply are included.
percent). Institutions operating overdraft LOC or linked-account programs were less likely than those
that operated promoted automated programs to provide customers with information about fees, transac-
tion processing, or coverage (see Table V-11).
V.4.D. Advertising Overdraft Programs
Among the 906 study population banks that operated promoted automated overdraft, linked-account,
and overdraft LOC programs, more than 80 percent advertised in newspapers, on the radio, or on tele-
vision in 2006; however, overdraft programs were generally not featured in these advertisements (see
Table V-12). In the case of promoted automated programs, 7.9 percent of institutions that advertised in
newspapers, radio, or television specifically featured the automated overdraft program. Large institutions
(13.6 percent) and those that had promoted automated programs as the only formal overdraft program
(14.9 percent) were more likely to feature them in advertising. For study population banks with linked
accounts and overdraft LOCs, 1.6 percent and 3.6 percent, respectively, featured the overdraft program
in advertising.
Among the small number of study population banks that featured promoted automated programs in their
advertising (24 banks), two-thirds further reported that their advertisements were primarily geared
toward promoting that program or prominently featured that program. Conversely, as Table V-13 shows,
when study population banks advertised linked-account or overdraft LOC programs, emphasis was
placed on the program relatively infrequently (16.0 percent and 18.4 percent, respectively). In the case
of advertising through customer mailings in the year 2006, study population institutions were more likely
to primarily or prominently feature promoted automated programs (16.9 percent) than linked accounts
(1.8 percent) or overdraft LOCs (3.8 percent) (see Tables V-12 and V-13).
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 36
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
Table V-12
Advertising for Promoted Automated Programs
Number of Study Population Banks a
By Presence of other
Percent of Column Total By Asset Size Overdraft Programs
$250 Million Automated
Less than to Less than Greater than Automated and Other
All $250 Million $1 Billion $1 Billion Only Programs
Did your institution send customer mailings prominently featuring the program?
Yes 63 50 6 7 17 46
16.9 23.6 5.6 14.3 21.0 15.8
No 310 161 107 42 64 247
83.1 76.4 94.4 85.7 79.0 84.2
Total with promoted automated 374 211 114 49 81 293
100.0 100.0 100.0 100.0 100.0 100.0
Did your institution advertise in newspapers, radio, or television?
Yes 304 161 99 44 81 255
81.5 76.4 87.3 89.8 100.0 87.1
No 69 50 14 5 0 38
18.5 23.6 12.7 10.2 0.0 12.9
Total with promoted automated 374 211 114 49 81 293
100.0 100.0 100.0 100.0 100.0 100.0
If yes, did your institution feature the overdraft program?
Yes 24 12 6 6 9 15
7.9 7.1 6.5 13.6 14.9 6.2
No 281 150 93 38 50 231
92.1 92.9 93.5 86.4 85.1 93.8
Total with promoted automated and 304 161 99 44 58 246
advertised 100.0 100.0 100.0 100.0 100.0 100.0
If yes, was it featured prominently?
Yes 16 8 3 5 5 11
66.4 66.7 50.0 83.3 55.8 72.4
No 8 4 3 1 4 4
33.6 33.3 50.0 16.7 44.2 27.6
Total with promoted automated and 24 12 6 6 9 15
featured program in advertisement 100.0 100.0 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 37
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
Table V-13
Advertising for Linked-Account and Overdraft LOC Programs
Number of Study Population Banksa
Percent of Column Total
Banks with Linked Banks with Overdraft
Accounts LOC Programs
Did your institution send customer mailings prominently featuring the program?
Yes 13 22
1.8 3.8
No 714 565
98.2 96.2
Total with program 728 587
100.0 100.0
Did your institution advertise in newspapers, radio, or television?
Yes 621 488
85.3 83.2
No 107 99
14.7 16.8
Total with program 728 587
100.0 100.0
If yes, did your institution feature the overdraft program?
Yes 10 17
1.6 3.6
No 611 471
98.4 96.4
Total with program and advertised 621 488
100.0 100.0
If yes, was it featured prominently?
Yes 2 3
16.0 18.4
No 8 14
84.0 81.6
Total with program and featured program in advertisement 10 17
100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
V.5. ATM and POS/Debit Balance Disclosures
Surveyed institutions were asked whether balances at proprietary and nonproprietary ATMs showed
overdraft coverage limits for purposes of their promoted automated overdraft programs or their overdraft
LOC programs. The survey also asked questions related to the timing of NSF notifications in ATM and
POS/debit transactions. NSF notification questions applied to banks with promoted and nonpromoted
automated overdraft programs, as well as those that operated overdraft LOC programs.
V.5.A. Overdraft Coverage Limit Display
Among the 374 study population banks with a promoted automated program, 308 banks (81.4 percent)
covered ATM withdrawals (see Table V-14). Of these banks, most (76.9 percent) did not display over-
draft coverage limits at proprietary ATMs. The tendency to exclude the overdraft limit from ATM
balances increased with bank size. A minority of the 308 study population banks (16.1 percent) displayed
the overdraft limit at proprietary ATMs and did so separately from the account balance. Institutions
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 38
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
Table V-14
Balances Shown at ATMs for Promoted Automated Programs
Number of Study Population Banksa
Percent of Column Total By Asset Size By Vendor Use
Did your institution show overdraft coverage limits at $250 Million Greater
balances provided at proprietary ATMs/ Less than to Less than than Uses Does Not
nonproprietary ATMs? All $250 Million $1 Billion $1 Billion Vendor Use Vendor
Proprietary ATMs
Overdraft limit is not shown in any ATM balance 237 119 82 36 125 112
76.9 72.1 81.0 85.7 71.1 84.6
Overdraft limit is included in the only balance shown 22 15 6 0 9 12
7.1 9.3 6.3 0.0 5.3 9.5
Overdraft limit is shown but listed separately 50 31 13 6 42 8
16.1 18.6 12.7 14.3 23.7 5.9
Total with promoted automated that covers ATM 308 165 101 42 176 132
transactions 100.0 100.0 100.0 100.0 100.0 100.0
Nonproprietary ATMs
Overdraft limit is not shown in any ATM balance 221 111 80 30 118 104
71.9 67.4 79.4 71.4 66.8 78.7
Overdraft limit is included in the only balance shown 17 12 5 1 6 11
5.6 7.0 4.8 2.4 3.7 8.2
Overdraft limit is shown but listed separately 22 12 8 2 20 2
7.0 7.0 7.9 4.8 11.3 1.2
Do not know 48 31 8 9 32 16
15.5 18.6 7.9 21.4 18.2 11.9
Total with promoted automated that covers ATM 308 165 101 42 176 132
transactions 100.0 100.0 100.0 100.0 100.0 100.0
Memo item(s): Number of banks with promoted auto- 66 46 13 7 46 20
mated programs that do not cover ATM transactions
Percent of study population banks 17.6 21.8 11.3 14.3 20.5 13.3
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
that used vendors to operate their automated programs were more likely than those that did not (23.7
percent versus 5.9 percent) to display the overdraft limit separately.
A small portion (7.1 percent) of study population banks with promoted automated programs that
covered ATM transactions combined the overdraft limit with the account balance in the only balance
displayed to customers at proprietary ATMs. Small banks were most likely to include the overdraft limit
in a combined balance at proprietary ATMs (9.3 percent), and no large banks did so.
Among study population banks with overdraft LOCs (587 institutions), 87.6 percent (514 institutions)
covered NSF transactions at ATMs (see Table V-15). Almost 70 percent of these 514 institutions did
not list overdraft limits in ATM balances at proprietary machines, and 20.4 percent of banks displayed
balances with the overdraft limit included. Another 12.0 percent of banks with overdraft LOC programs
that covered ATM transactions listed the credit limit separately. This practice was more common as
bank size increased (24.3 percent of large institutions listed the limit separately).
In general, study population banks with promoted automated overdraft and overdraft LOC programs
reported results for institutional practices for nonproprietary ATMs that were similar to those reported
for proprietary ATMs. In some cases, study population banks (15.5 percent of those with promoted auto-
mated programs and 13.8 percent of those with overdraft LOCs) did not know how balances were
displayed at nonproprietary ATMs.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 39
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
Table V-15
Balances Shown at ATMs for Overdraft LOC Programs
Number of Study Population Banksa
Percent of Column Total By Asset Size
$250 Million to
Did your institution show overdraft coverage limits at balances Less than Less than Greater than
provided at proprietary ATMs/nonproprietary ATMs? All $250 Million $1 Billion $1 Billion
Proprietary ATMs
Overdraft limit is not shown in any ATM balance 347 234 75 38
67.5 73.5 61.8 51.4
Overdraft limit is included in the only balance shown 105 61 26 18
20.4 19.3 21.1 24.3
Overdraft limit is shown but listed separately 62 23 21 18
12.0 7.2 17.1 24.3
Total with overdraft LOC programs that covers ATM transactions 514 318 122 74
100.0 100.0 100.0 100.0
Nonproprietary ATMs
Overdraft limit is not shown in any ATM balance 341 230 74 37
66.3 72.3 60.5 50.0
Overdraft limit is included in the only balance shown 80 50 16 14
15.5 15.7 13.2 18.9
Overdraft limit is shown but listed separately 22 0 11 11
4.3 0.0 9.2 14.9
Do not know 71 38 21 12
13.8 12.1 17.1 16.2
Total with overdraft LOC programs that covers ATM transactions 514 318 122 74
100.0 100.0 100.0 100.0
Memo item(s): Number of banks with overdraft LOC programs 73 50 13 10
that does not cover ATM transactions
Percent of study population banks 12.4 13.5 9.5 11.9
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
V.5.B. Customer NSF Notification
As discussed in Section IV, institutions often charged customers an NSF fee when overdrafts occurred.
It is helpful for consumers to have a warning before an NSF fee is charged at an ATM or POS/debit
terminal. Accordingly, institutions were asked when a customer was notified that an ATM or POS/debit
transaction would result, or resulted in, an NSF. In particular, institutions were asked whether customers
were notified at the time of the transaction, either before or after the completion of the transaction;
subsequent to the transaction, such as by mail or e-mail; or using some other method.
Table V-16 shows that among the survey population banks with automated overdraft programs that
covered NSFs at ATMs (385 banks), less than one-quarter (23.5 percent) informed customers at the
time of the transaction, prior to its completion. Instead, a slight majority (54.5 percent) informed the
customer subsequent to the transaction, via notification such as mail or e-mail, rather than at the time of
the transaction; slightly more than16 percent notified customers about NSFs at the time of the transac-
tion, but after its completion.
For study population institutions with automated overdraft programs that covered POS/debit transac-
tions (403 banks), only 7.9 percent of such banks notified customers of an NSF at the time of a POS/
debit transaction prior to completing the transaction. Instead, the majority (86.2 percent) informed the
customer about an NSF subsequent to the time of the transaction, such as via mail or e-mail.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 40
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
Among institutions with automated programs, institutions with nonpromoted overdraft programs were
more likely than institutions with promoted programs to inform the customer of an NSF at the time of
the transaction, prior to transaction completion (31.0 percent versus 21.7 percent for ATM transactions
and 19.6 percent versus 5.0 percent for POS/debit transactions).
Compared with study population banks with automated overdraft programs, banks with overdraft LOCs
were slightly less likely to notify customers of an ATM NSF at the time of the transaction, prior to trans-
action completion (15.8 percent for overdraft LOC programs versus 23.5 percent for automated overdraft
programs), and somewhat more likely to inform customers subsequent to the time of the transaction, via
notification such as mail or e-mail (65.7 percent versus 54.5 percent) (see Tables V-16 and V-17). The
reverse was true, however, for POS/debit transactions. Study population banks with overdraft LOCs that
covered POS/debit transactions were slightly more likely than those with automated overdraft programs
to notify customers of an NSF prior to a transaction’s completion (12.6 percent for overdraft LOC
Table V-16
Customer Notification of ATM and/or POS/Debit NSF for Automated Overdraft Programs
Number of Study Population Banksa By Type of Automated
Percent of Column Total By Asset Size Program
When did your institution notify a customer $250 Million
when an ATM or POS/debit transaction Less than to Less than Greater than Non-
resulted in an NSF? All $250 Million $1 Billion $1 Billion promoted Promoted
ATM transactions
At the time of transaction, prior to completion 91 42 30 18 24 67
23.5 21.2 25.7 26.9 31.0 21.7
At the time of transaction, after completion 62 35 13 15 16 46
16.2 17.3 10.8 22.4 20.9 15.0
Subsequent to transaction 210 115 66 29 34 176
54.5 57.7 55.4 43.3 43.5 57.2
Other b 22 8 10 5 4 19
5.8 3.8 8.1 7.5 4.7 6.1
Total with automated that covers ATM 385 199 119 67 77 308
transactions 100.0 100.0 100.0 100.0 100.0 100.0
Memo item(s): Number of banks with auto- 89 54 19 16 23 66
mated program that do not cover ATM
transactions
Percent of study population banks 18.8 21.2 14.0 19.3 23.0 17.6
POS/debit transactions
At the time of transaction, prior to completion 32 19 10 3 16 16
7.9 9.1 7.9 4.3 19.6 5.0
At the time of transaction, after completion 11 4 5 2 2 9
2.6 1.8 3.9 2.9 2.0 2.8
Subsequent to transaction 347 180 106 61 61 286
86.2 85.5 86.8 87.1 75.9 88.7
Other b 13 8 2 4 2 11
3.3 3.6 1.3 5.7 2.5 3.5
Total with automated that covers 403 211 122 70 80 323
POS/debit transactions 100.0 100.0 100.0 100.0 100.0 100.0
Memo item(s): Number of banks with auto- 71 42 16 13 20 51
mated program that does not cover POS/debit
transactions
Percent of study population banks 15.0 16.7 11.6 15.7 20.0 13.7
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Includes one missing observation.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 41
Part One—Overdraft Survey V. Customer Enrollment, Marketing, and Disclosure Practices
Table V-17
Customer Notification of ATM and/or POS/Debit NSF for Overdraft LOC Programs
Number of Study Population Banksa
Percent of Column Total By Asset Size
$250 Million to
When did your institution notify a customer when an ATM or POS/ Less than Less than Greater than
debit transaction resulted in an NSF? All $250 Million $1 Billion $1 Billion
ATM transactions
At the time of transaction, prior to completion 81 50 19 12
15.8 15.7 15.8 16.2
At the time of transaction, after completion 46 31 10 6
9.0 9.6 7.9 8.1
Subsequent to transaction 338 215 80 43
65.7 67.5 65.8 58.1
Other 49 23 13 13
9.5 7.2 10.5 17.6
Total with overdraft LOC programs that covers ATM transactions 514 318 122 74
100.0 100.0 100.0 100.0
Memo item(s): Number of banks with overdraft LOC programs that 73 50 13 10
do not cover ATM transactions
Percent of study population banks 12.4 13.5 9.5 11.9
POS/debit transactions
At the time of transaction, prior to completion 64 46 10 8
12.6 15.0 7.8 10.5
At the time of transaction, after completion 14 12 2 1
2.8 3.8 1.3 1.3
Subsequent to transaction 388 230 101 57
76.7 75.0 81.8 75.0
Other 40 19 11 10
8.0 6.3 9.1 13.2
Total with overdraft LOC programs that covers POS/Debit 506 307 123 76
transactions 100.0 100.0 100.0 100.0
Memo item(s): Number of banks with overdraft LOC programs that 81 61 11 8
do not cover POS transactions
Percent of study population banks 13.7 16.7 8.3 9.5
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
programs versus 7.9 percent for automated overdraft programs), and somewhat less likely to inform
customers subsequent to the time of the transaction through customer notification (76.7 percent versus
86.2 percent).
V.6. Summary
The survey gathered information related to how overdraft programs are offered to new customers and
opt-in/opt-out features of the overdraft programs. In most cases, survey disclosure results regarding auto-
mated overdraft programs applied only to promoted programs. As mentioned, more than half of the
transaction deposit dollars held in study population banks were maintained in institutions with nonpro-
moted automated overdraft programs. Therefore, some of the marketing and survey disclosure results
presented in this section may not apply to a significant number of customers with nonpromoted auto-
mated programs.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 42
Part One—Overdraft Survey VI. Internal Controls and Monitoring Systems
About half of the institutions in the study with multiple overdraft programs (45.6 percent) offered all
programs available to new customers. However, approximately one-fifth of institutions (19.3 percent)
offered only promoted automated programs unless the customer specifically requested alternative over-
draft options.
Customers in the majority of study population banks operating automated programs (75.1 percent) were
automatically enrolled in the programs, but were allowed to affirmatively request to be removed from, or
opt out of, the program. Some banks commented that customers were not given the choice to opt in or
out of the program; this comment was most often reported for institutions with nonpromoted automated
programs. In contrast, the large majority of banks with linked-account programs (94.7 percent) followed
an opt-in policy. Customers have to apply and qualify for an overdraft LOC program, so it was assumed
that these were opt-in programs.
The survey also gathered information on the frequency and methods of providing information to
consumers about overdraft programs. Nearly all banks, especially large banks, provided consumers with
some type of information about overdraft programs. These survey results, however, provided no evidence
of the quality and adequacy of the information provided to consumers.
Most study population banks that operated promoted automated programs that covered ATM transac-
tions (76.9 percent) did not display overdraft coverage limits at proprietary ATMs. Sixteen percent of
banks with promoted automated overdraft programs that covered ATM transactions did so separately
from the account balance. About 7 percent of the study population banks with promoted automated
overdraft programs that covered ATM transactions combined the overdraft limit with the account
balance in the only account balance displayed to customers at proprietary ATMs. This practice was more
common among small banks (9.3 percent).
Additional opportunities for disclosure were evident when considering the information provided to a
customer at the time of, or subsequent to, the transaction. Most study population banks whose auto-
mated overdraft program covered ATM and POS/debit transactions informed customers of an NSF only
after the transaction had been completed (88.8 percent of banks for POS/debit and 70.7 percent of
banks for ATMs), such as by mail or e-mail after the transaction. In the case of ATM transactions, less
than one-quarter of study population banks alerted their customers prior to the completion of a transac-
tion that the transaction would result in an overdraft. In the case of POS/debit transactions, only 7.9
percent of banks notified customers that completing a given transaction would result in an NSF. This
was more likely among small banks. Among study population banks operating automated overdraft
programs, banks with nonpromoted programs were more likely than those with promoted programs to
alert customers before completing the transaction, for both ATM and POS/debit transactions.
VI. Internal Controls and Monitoring Systems
Surveyed institutions were asked whether written policies and procedures were adopted to address risks
associated with overdraft programs and practices, and about the content of these written policies. Banks
were also asked about practices surrounding compliance reviews and ongoing monitoring of overdrafts.
VI.1. Written Policies
When asked whether study population banks adopted written policies and procedures to address the
operational and other risks associated with overdraft programs, a large majority of institutions with auto-
mated overdraft programs (83.0 percent) reported having written policies. This was the case for 64.2
percent of banks with overdraft LOC programs and 22.7 percent of institutions with linked-account
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 43
Part One—Overdraft Survey VI. Internal Controls and Monitoring Systems
programs (see Table VI-1). For these formal overdraft programs, the larger the institution, the more
likely it had adopted written policies and procedures. For example, for study population banks with auto-
mated overdraft programs, 94.0 percent of large banks had written policies compared with 75.8 percent
of small banks.
Table VI-1
Overdraft Program Policies for Automated Overdraft Programs
All Banks with
Number of Study Population Banksa By Type of Automated Linked Accounts or
Percent of Column Total By Asset Size Program LOC Programs
$250 Million
Less than to Less than Greater than Non- All Linked
All $250 Million $1 Billion $1 Billion promoted Promoted Accounts All LOCs
Did your institution have a written policy?
No 81 61 14 5 22 59 563 210
17.0 24.2 10.5 6.0 21.5 15.8 77.3 35.8
Yes 393 192 123 78 79 315 165 377
83.0 75.8 89.5 94.0 78.5 84.2 22.7 64.2
Total with program 474 253 138 83 100 374 728 587
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100
If yes, did the policy set a credit limit?
No 46 27 11 8 18 28 NA 179
11.7 14.0 9.1 10.3 23.0 8.9 NA 47.5
Yes 347 165 112 70 61 287 NA 198
88.3 86.0 90.9 89.7 77.0 91.1 NA 52.5
Total with program and written 393 192 123 78 79 314 NA 377
policy 100.0 100.0 100.0 100.0 100.0 100.0 NA 100
If yes, what other features were included in the policy? b (Multiple Answers Allowed)
Fees 318 161 98 59 51 267 104 170
80.8 84.0 79.2 75.6 65.0 84.8 63.1 45.0
APR NA NA NA NA NA NA NA 184
NA NA NA NA NA NA NA 48.8
Customer disclosure process 194 96 61 37 0 194 89 160
49.3 50.0 49.4 47.4 0.0 61.6 54.2 42.5
Customer notification timeline 285 130 96 58 51 234 74 150
72.4 68.0 77.9 74.4 64.7 74.3 45.1 39.8
Repayment period 328 157 106 65 53 276 NA 166
83.4 82.0 85.7 83.3 66.8 87.6 NA 44.0
Charge-off timeline 309 150 98 62 53 257 NA 147
78.7 78.0 79.2 79.5 66.8 81.7 NA 39.2
Workout procedures 177 73 64 40 24 153 NA 95
45.0 38.0 52.0 51.3 30.3 48.7 NA 25.2
Other 51 19 24 8 15 36 31 124
13.0 10.0 19.5 10.3 18.9 11.6 19.1 33.0
Total with program and written 393 192 123 78 79 314 165 377
policy 100.0 100.0 100.0 100.0 100.0 100.0 100 100
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Percentage shares do not sum to 100.0 percent because all answers that apply are included.
Note: NA = not applicable.
FDIC StuDy oF Bank overDraFt ProgramS n novemBer 2008 44
Part One—Overdraft Survey VI. Internal Controls and Monitoring Systems
Institutions were asked whether specific overdraft program features were covered in their written poli-
cies, including overdraft coverage caps (for automated and overdraft LOC programs and ad hoc prac-
tices only), overdraft fees, disclosure-related procedures (not applicable for nonpromoted automated
programs), and overdraft repayment timeline and procedures (not applicable for linked-account
programs).
Among study population banks with automated overdraft programs that had written policies, 88.3
percent included a cap on the dollar amount available to be extended to a customer. This was more
prevalent among promoted automated programs (91.1 percent) than nonpromoted programs (77.0
percent). Among study population banks operating overdraft LOCs that had written policies, more than
half (52.5 percent) set caps on maximum advances available to be extended to customers.
For more than 80 percent of banks with automated overdraft programs, written policies covered all asso-
ciated fees, although institutions with promoted programs (84.8 percent) were more likely to include
associated fees in those policies than banks with nonpromoted programs (65.0 percent). Written policies
for institutions with automated overdraft programs were also likely to cover customer notification time-
lines, repayment periods, and charge-off timelines. Written policies governing promoted automated over-
draft programs were more likely than those governing nonpromoted programs to include each specific
feature. There were no notable patterns across bank groups based on asset size (see Table VI-1).
Study population banks with written policies for linked-account and overdraft LOC programs were
generally less likely to cover specific program features in those policies, compared with automated over-
draft programs (see Table VI-1). For example, only 63.1 percent of banks with written policies for linked-
account programs and 45.0 percent for overdraft LOCs included information about all associated fees.
VI.2. Compliance Review Prior to the Implementation of the Overdraft Program
To assess the level of preliminary compliance review conducted, institutions were asked whether counsel,
management, the institution’s board of directors, or someone else reviewed overdraft programs for
compliance with applicable laws prior to implementation of a given program. As Table VI-2 shows, more
than 95 percent of institutions with automated overdraft programs reported that their programs were
reviewed by at least one of the parties identified in the survey, whether inside or independent from the
bank. Bank management review was common (85.4 percent) for automated overdraft programs, and
board of directors review was fairly common (62.7 percent) (see Table VI-2). Five percent of institutions
with automated overdraft programs reported that no compliance review was conducted prior to
implementation.
Among study population banks with linked-account and overdraft LOC programs, compliance review by
bank management was also the most common type of review performed before implementing the over-
draft program (54.5 percent and 67.6 percent, respectively). Institutions operating linked-account and
overdraft LOCs reported that their programs had not initially been reviewed for compliance in 23.1
percent and 12.9 percent of the cases, respectively.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 45
Part One—Overdraft Survey VI. Internal Controls and Monitoring Systems
Table VI-2
Compliance Review Policies for Automated Overdraft Programs
Number of Study Population Banksa All Banks with Linked
Percent of Column Total By Asset Size Accounts or LOC Programs
Did your institution review the program
for compliance with applicable laws $250 Million
prior to implementation? b Less than to Less than Greater than All Linked
(Multiple answers allowed) All $250 Million $1 Billion $1 Billion Accounts All LOCs
Yes, by bank counsel 107 38 30 38 27 84
22.5 15.2 22.1 45.8 3.7 14.3
Yes, by independent counsel 113 58 32 23 23 42
23.8 22.7 23.3 27.7 3.1 7.2
Yes, by bank management 405 207 127 71 397 397
85.4 81.8 91.9 85.5 54.5 67.6
Yes, by bank board 297 169 87 42 187 233
62.7 66.7 62.8 50.6 25.7 39.7
Not reviewed 22 15 3 3 168 76
4.5 6.1 2.3 3.6 23.1 12.9
Other 78 35 35 8 65 117
16.4 13.6 25.6 9.6 8.9 19.9
Total with program 474 253 138 83 728 587
100.0 100.0 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Percentage shares do not sum to 100.0 percent because all answers that apply are included.
VI.3. Methods for Monitoring and Evaluating Overdraft Programs
When asked how often senior management evaluated overdraft programs in the year 2006—including
reviewing overdraft activity, heavy usage, income, and losses—the majority of institutions with auto-
mated overdraft programs (58.4 percent) reported conducting reviews 12 times per year (monthly) (see
Table VI-3). However, 30.2 percent reviewed their programs less frequently, including 16.4 percent of
institutions that reported no evaluations of their automated overdraft program in 2006. As Table VI-3
shows, senior management evaluation of the overdraft program occurred at 36.2 percent of institutions
with linked accounts and at 52.9 percent of institutions with overdraft LOCs for the year 2006.
Study population banks generally used a variety of methods to monitor and evaluate overdraft program
performance, which is also noted in Table VI-3.28 Based on the results collected in the survey, the most
common monitoring and evaluation method for automated overdraft programs was self-evaluation
(73.0 percent), which was particularly common among medium and large institutions (84.9 percent and
81.9 percent, respectively). Although some banks used vendors or consultants to provide additional
monitoring, nearly half (48.3 percent) of the institutions with automated programs used self-evaluation
exclusively. The next-most-common monitoring method for banks with automated programs was the
use of reports provided by vendors (32.4 percent). About 13 percent of institutions with automated
programs did not regularly evaluate automated overdraft program performance. Small institutions were
most likely to respond that they did not regularly evaluate automated overdraft program performance
(16.7 percent of small institutions, compared with 8.1 percent of medium institutions and 7.2 percent of
large institutions).
28
In particular, institutions were asked if one or more of the following methods were used to monitor and evaluate performance
of the overdraft program: vendor-supplied reports, self-evaluation, outside consultant evaluation, no regular evaluation, or “other.”
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 46
Part One—Overdraft Survey VI. Internal Controls and Monitoring Systems
Table VI-3
Evaluation of Automated Overdraft Programs
Number of Study Population Banks a
All Banks with Linked
Percent of Column Total By Asset Size Accounts or LOC Programs
$250 Million
Less than to Less than Greater than All Linked
All $250 Million $1 Billion $1 Billion Accounts All LOCs
How many times did senior management evaluate the program in 2006?
More than 12 times 54 31 14 9 36 44
11.4 12.1 10.5 10.8 5.0 7.5
12 times 277 138 90 49 164 158
58.4 54.5 65.1 59.0 22.5 27.0
Less than 12 times 65 35 21 10 63 108
13.8 13.6 15.1 12.1 8.7 18.4
Never 78 50 13 15 464 276
16.4 19.7 9.3 18.1 63.8 47.1
Total with program 474 253 138 83 728 587
100.0 100.0 100.0 100.0 100.0 100.0
How did your institution evaluate and monitor overdraft programs? b (Multiple answers allowed)
Vendor provides reports 154 92 47 15 32 29
32.4 36.4 33.7 18.1 4.5 4.9
Self-evaluation 346 161 117 68 254 320
73.0 63.6 84.9 81.9 34.9 54.6
Consultant conducts evaluation 14 4 6 4 3 16
3.0 1.5 4.7 4.8 0.4 2.7
Evaluations are not conducted 59 42 11 6 420 216
12.5 16.7 8.1 7.2 57.8 36.7
Other 25 15 5 5 33 21
5.3 6.1 3.5 6.0 4.6 3.5
Total with program 474 253 138 83 728 587
100.0 100.0 100.0 100.0 100.0 100.0
How did your institution evaluate and monitor overdraft programs? All combinations
Evaluations are not conducted 59 42 11 6 420 216
12.5 16.7 8.1 7.2 57.8 36.7
Self-evaluation only 229 104 71 55 236 300
48.3 40.9 51.2 66.3 32.4 51.2
Vendor, consultant and/or other 185 107 56 22 65 63
39.1 42.4 40.7 26.5 8.9 10.8
Item(s) not reported NA NA NA NA 7 7
NA NA NA NA 0.9 1.3
Total with program 474 253 138 83 728 587
100.0 100.0 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
b
Percentage shares do not sum to 100.0 percent because all answers that apply are included.
Note: NA = No applicable.
Similar to automated overdraft programs, the most common monitoring and evaluation method for
linked-account and overdraft LOC programs was self-evaluation (34.9 percent and 54.6 percent, respec-
tively). However, 57.8 percent of institutions operating linked accounts and 36.7 percent with overdraft
LOCs reported that they did not monitor and evaluate their overdraft program performance.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 47
Part One—Overdraft Survey VI. Internal Controls and Monitoring Systems
VI.4. Ongoing Customer-Level Monitoring of Overdraft Programs
The survey also collected information on bank monitoring of customer-level usage and accrual of fees
and interest, extensive use of overdraft programs by customers, denial of coverage (automated overdraft
programs only), and complaint frequency.
Among study population banks with automated overdraft programs, 74.0 percent maintained customer-
level information about usage, fees, and interest accrued (see Table VI-4). In particular, 60.1 percent of
banks with automated overdraft programs reported monitoring excessive overdraft usage. No major
differences were reported across the different asset-size groups.
Among study population banks with linked accounts and overdraft LOCs, 34.0 percent and 64.0, respec-
tively, maintained customer-level information about usage, fees, and interest accrued for these overdraft
programs. Excessive overdraft program usage was monitored by 25.8 percent of banks with linked
accounts and 29.1 percent of banks with overdraft LOCs.
The survey also asked institutions with automated overdraft programs about special monitoring of NSF
or overdraft fees and activity for individual accounts that were largely funded by fixed, nonattachable
income, such as Social Security and Veterans Administration payments. As shown in Table VI-5, most
institutions with automated overdraft programs (94.2 percent) responded that they did not conduct this
type of monitoring.
The survey also gathered information on whether study population banks with promoted automated
programs (374 institutions) denied overdraft coverage in 2006 for a customer in good standing, even
when there were sufficient funds within the institution’s policy limits. Very few institutions (2.2 percent)
reported denying coverage of an NSF item for that year (see Table VI-5).
In addition, surveyed institutions were asked to report the number of complaints received in 2006
related to the various types of overdraft programs operated (see Table VI-6). Among study population
banks with automated overdraft programs, 12.5 percent received at least one complaint related to the
program in 2006. Large institutions were more likely to receive complaints about automated programs;
Table VI-4
Maintenance of Consumer Information and Monitoring of Excessive Use of Overdraft Programs
Number of Study Population Banksa All Banks with Linked
Percent of Column Total By Asset Size Accounts or LOC Programs
$250 Million
All Less than to Less than Greater than All Linked
Automated $250 Million $1 Billion $1 Billion Accounts All LOCs
Did your institution maintain customer-level information on usage, fees, and interest?
Yes 351 180 107 63 248 375
74.0 71.2 77.9 75.9 34.0 64.0
No 123 73 30 20 480 211
26.0 28.8 22.1 24.1 66.0 36.0
Total with program 474 253 138 83 728 587
100.0 100.0 100.0 100.0 100 100
Did your institution monitor for excessive usage?
Yes 285 153 87 45 188 171
60.1 60.6 62.8 54.2 25.8 29.1
No 189 100 51 38 540 416
39.9 39.4 37.2 45.8 74.2 70.9
Total with program 474 253 138 83 728 587
100.0 100.0 100.0 100.0 100 100
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
FDIC StuDy oF Bank overDraFt ProgramS n novemBer 2008 48
Part One—Overdraft Survey VI. Internal Controls and Monitoring Systems
21.7 percent of large institutions received at least one complaint, compared with about 10.5 percent of
small and medium institutions. Institutions with nonpromoted automated programs were more likely
(25.0 percent) to receive complaints about the overdraft program than institutions with promoted
programs (9.1 percent). Also, among banks with automated overdraft programs, institutions that covered
ATM or POS/debit transactions were more likely to receive complaints (13.7 percent of banks that
covered ATM or POS/debit transactions, compared with 5.5 percent of banks that did not cover these
transactions). In contrast, complaints were rare in institutions with linked-account (0.5 percent) and
overdraft LOC programs (1.4 percent).
Table VI-5
Other Monitoring of Automated Overdraft Programs
Number of Study Population Banksa
Percent of Column Total By Asset Size
$250 Million to
Less than Less than Greater than
All $250 Million $1 Billion $1 Billion
Did your institution monitor accounts funded by fixed, non­attachable income?
Yes 25 15 8 2
5.3 6.1 5.8 2.4
No 447 238 130 79
94.2 93.9 94.2 95.2
Item(s) not reported 2 0 0 2
0.4 0.0 0.0 2.4
474 253 138 83
Total with automated 100.0 100.0 100.0 100.0
Has your insitution denied an NSF item although sufficient funds were available?
Yes 8 4 3 1
2.2 1.8 2.8 2.0
No 366 207 111 48
97.8 98.2 97.2 98.0
Total with promoted automated 374 211 114 49
100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
Note(s): Question was asked only of institutions with promoted automated programs.
Table VI-6
Complaints about Automated Overdraft Programs
All Banks with
Number of Study Population Banksa By Type of By Transactions Linked Accounts
Percent of Column Total By Asset Size Automated Program Covered or LOC Programs
Less $250 Does Not
Has your institution than Million to Greater Cover ATM Covers All
received any complaints $250 Less than than $1 Non- or POS/ ATM or Linked All
about the program? All Million $1 Billion Billion promoted Promoted Debit POS/Debit Accounts LOCs
Yes 59 27 14 18 25 34 4 55 4 8
12.5 10.6 10.5 21.7 25.0 9.1 5.5 13.7 0.5 1.4
No 415 226 123 65 75 340 66 348 724 578
87.5 89.4 89.5 78.3 75.0 90.9 94.5 86.3 99.5 98.6
Total with program 474 253 138 83 100 374 70 404 728 587
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 49
Part One—Overdraft Survey VII. The Role of Vendors and Third Parties in Overdraft Practices
VI.5. Summary
Most study population banks with automated overdraft programs (83.0 percent) adopted written policies
and procedures addressing operational and other program risks. These written policies were more preva-
lent among large banks (94.0 percent). In general, policies covering automated overdraft programs—
and more so for promoted programs—were likely to address each of the program features identified in
the survey. When institutions maintained policies and procedures for linked-account and overdraft LOC
programs, it was less likely that specific program features were covered.
Management review was the most common type of compliance review that study population banks
performed before implementing the automated overdraft program (85.4 percent of banks with automated
overdraft programs). More than half of the banks with automated overdraft programs reviewed the
program on a monthly basis during 2006; however, 16.4 percent reported no evaluations of the auto-
mated program during this period. Self-evaluation was the most common method used to monitor and
evaluate program performance.
Almost three-quarters of study population banks with automated overdraft programs maintained custom-
er-level information on usage, fees, and interest accrued by their programs. While the majority
of institutions reported monitoring for excessive usage of the overdraft program, about 40 percent of
institutions did not. When overdraft coverage was within the institution’s policy limits, denial of NSF
transactions among banks with promoted automated overdraft programs was rare (2.2 percent). Also, 5.3
percent of banks with automated overdraft programs monitored accounts largely funded by fixed, nonat-
tachable income.
Of the study population banks with automated overdraft programs, 12.5 percent received consumer
complaints about these programs. These complaints were more common for large institutions
(21.7 percent versus 10.6 for small banks), institutions with nonpromoted programs (25.0 percent,
compared with 9.1 percent of banks with promoted programs), and institutions that covered NSFs at
ATMs and POS/debit terminals (13.7 percent versus 5.5 percent of banks with automated overdraft
programs that did not cover these types of transactions). In contrast, complaints about linked accounts
were reported by less than 1 percent of banks, and LOC overdraft program complaints were reported by
less than 1.5 percent of banks operating these programs.
VII. The Role of Vendors and Third Parties
in Overdraft Practices
In recent years, third-party vendors have played a significant role in the development and implementa-
tion of automated overdraft programs, particularly at smaller banks. Vendor-provided overdraft programs
have been marketed as tools to enhance an institution’s internal reporting system for overdraft-related
activities. Regulators and others have found, however, that vendor-supplied overdraft programs generally
differ from in-house programs in that vendor programs feature “marketing plans that appear designed to
promote the generation of fee income.”29 To better understand the role of third-party vendors in the
provision of overdraft services, the survey asked institutions that operated an automated overdraft
program a variety of questions concerning third-party vendor usage, contract duration, and
compensation.30
29
See the Regulation DD (Truth in Savings) Final Rule at 70 Fed. Reg. 29582 (May 24, 2005); see also Joint Guidance on Overdraft
Protection Programs at 70 Fed. Reg. 9127 (Feb. 24, 2005).
30
Institutions were not asked these questions in connection with linked-account or overdraft LOC programs.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 50
Part One—Overdraft Survey VII. The Role of Vendors and Third Parties in Overdraft Practices
Table VII-1
Institutions’ Relationships with Vendors for Automated Overdraft Programs
Number of Study Population Banksa By Type of Automated
Percent of Column Total By Asset Size Program
$250 Million
Less than to Less than Greater than
All $250 Million $1 Billion $1 Billion Nonpromoted Promoted
Did your institution use a vendor?
Yes 257 157 74 26 35 222
54.2 62.1 53.5 31.3 35.3 59.3
No 216 96 64 56 64 152
45.6 37.9 46.5 67.5 63.7 40.7
Item(s) not reported 1 0 0 1 1 0
0.2 0.0 0.0 1.2 1.0 0.0
Total with automated 474 253 138 83 100 374
100.0 100.0 100.0 100.0 100.0 100.0
If your institution used a vendor, was the overdraft program established or expanded through a vendor?
Yes 216 130 64 21 20 196
83.9 82.9 87.0 80.8 55.6 88.4
No 41 27 10 5 16 26
16.1 17.1 13.0 19.2 44.4 11.6
Total with automated using vendor 257 157 74 26 35 222
100.0 100.0 100.0 100.0 100.0 100.0
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
VII.1. Vendor Usage
As Table VII-1 shows, 54.2 percent of study population banks with automated overdraft programs used a
vendor at the time of the survey. Institutions with promoted automated programs were more likely to use
an outside vendor; about 59.3 percent of institutions with promoted programs used an outside vendor to
implement and manage the program as of the survey date, compared with 35.3 percent of institutions
that had nonpromoted programs. In the study, small banks were more likely than large banks to use
outside vendors to manage the overdraft program (62.1 percent versus 31.3 percent).
Among study population banks with automated programs and that used vendors, 83.9 percent reported
using vendors to initially establish or expand automated overdraft programs. Institutions with promoted
programs were more likely to implement programs using a vendor; 88.4 percent of banks with promoted
programs initially established or expanded those programs using a third-party vendor, compared with
55.6 percent of institutions with nonpromoted programs. The tendency to contract with a vendor to
initiate or expand an automated overdraft program was relatively consistent among small, medium, and
large institutions.
Study population banks that used vendors to implement or manage automated overdraft programs were
also asked how long the vendor-supplied program(s) were used (see Table VII-2). Survey results show a
steady increase in institutions’ use of vendors to implement and manage automated overdraft programs in
the six years preceding the survey date. Close to 90 percent of institutions using vendor-supplied auto-
mated overdraft programs began using them in the six years prior to the survey, and 70.2 percent started
relationships with these vendors at some point during the four years prior to the survey. More than
one-third of the institutions that used vendors (36.4 percent) had been doing so for less than two years.
This trend was more pronounced among small banks and banks with nonpromoted overdraft programs.
Most small banks (75.6 percent) that used vendors at the time of the survey began relationships with
vendors within the prior four years. In contrast, among large institutions, 46.1 percent used vendors for
less than four years.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 51
Part One—Overdraft Survey VII. The Role of Vendors and Third Parties in Overdraft Practices
Table VII-2
Length of Vendor Relationships for Automated Overdraft Programs
Number of Study Population Banksa By Type of Automated
Percent of Column Total By Asset Size Program
$250 Million
Less than to Less than Greater than Non-
All $250 Million $1 Billion $1 Billion promoted Promoted
How long has your institution used your vendor?
0-2 years 94 69 18 7 17 76
36.4 43.9 23.9 26.9 48.9 34.4
2-4 years 87 50 32 5 11 76
33.8 31.7 43.5 19.2 30.1 34.4
4-6 years 49 31 11 7 1 48
19.0 19.5 15.2 26.9 2.8 21.6
More than 6 years 27 8 13 7 6 21
10.7 4.9 17.4 26.9 18.2 9.5
Total with automated using vendor 257 157 74 26 35 222
100.0 100.0 100.0 100.0 100.0 100.0
What was the original term of the vendor contract?
0-2 years 77 35 32 10 6 71
29.8 22.0 43.5 38.5 16.4 31.9
2-4 years 131 88 35 8 11 120
51.2 56.1 47.8 30.8 31.8 54.3
4-6 years 38 27 5 6 15 23
14.7 17.1 6.5 23.1 40.9 10.4
More than 6 years 11 8 2 2 4 7
4.4 4.9 2.2 7.7 10.8 3.4
Total with automated using vendor 257 157 74 26 35 222
100.0 100.0 100.0 100.0 100.0 100.0
Memo item(s):
Number of banks with automated over- 216 96 64 56 64 152
draft programs that do not use vendors
Percent of study population 45.6 37.9 46.5 67.5 63.7 40.7
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
Study population banks with nonpromoted programs generally started vendor relationships more recently
than those with promoted programs. Nearly half of the study population banks with nonpromoted
programs that used vendors (48.9 percent) started doing so within two years prior to the survey,
compared with 34.4 percent of promoted programs. About one-tenth of the institutions (10.7 percent)
used vendors for more than six years prior to the survey (9.5 percent of banks with promoted programs
and 18.2 percent of banks with nonpromoted programs).
Among study population banks with automated overdraft programs, large institutions and institutions
with promoted programs were more likely to have shorter vendor contract terms (see Table VII-2). More
than half (54.3 percent) of the contract terms for institutions with promoted automated programs were
in the two- to four-year range, nearly one-third (31.9 percent) were shorter, and only 13.8 were longer
than four years. In contrast, 51.7 percent of the study population banks with nonpromoted programs had
an average vendor contract duration of at least four years.
As Table VII-3 shows, nearly two-thirds of institutions in the study with automated programs that
purchased overdraft programs from a vendor (62.9 percent) used standardized or off-the-shelf programs.
Slightly more than one-third (36.3 percent) purchased programs customized for the institution. Among
study population banks that used vendors to manage their automated overdraft program, small banks
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 52
Part One—Overdraft Survey VII. The Role of Vendors and Third Parties in Overdraft Practices
Table VII-3
Type of Vendor Program Used for Automated Overdraft Programs
Number of Study Population Banksa By Type of Automated
Percent of Column Total By Asset Size Program
$250 Million
If your institution used a vendor, Less than to Less than Greater than Non-
describe the vendor program? All $250 Million $1 Billion $1 Billion promoted Promoted
Standardized or off-the-shelf 162 119 29 14 15 147
62.9 75.6 39.1 53.8 42.6 66.2
Customized for the institution 93 38 45 10 19 74
36.3 24.4 60.9 38.5 54.5 33.4
Other 2 0 0 2 1 1
0.8 0.0 0.0 7.7 2.8 0.5
257 157 74 26 35 222
Total with automated using vendors 100.0 100.0 100.0 100.0 100.0 100.0
Memo item(s):
Number of banks with automated over- 216 96 64 56 64 152
draft programs that do not use vendors
Percent of study population 45.6 37.9 46.5 67.5 63.7 40.7
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
and institutions with promoted programs were more likely to have standardized programs. Most small
banks that used vendors purchased standardized programs (75.6 percent), compared with 53.8 percent of
large banks. Also, two-thirds of institutions with promoted programs that reported using a vendor had
standardized programs (66.2 percent), compared with 42.6 percent of institutions with nonpromoted
programs.
VII.2. Vendor Compensation Structure
With regard to vendor compensation, most institutions in the study that operated automated overdraft
programs (70.6 percent) paid vendors a percentage of the income or fees generated by the overdraft
product purchased (see Table VII-4). The smaller the institution in terms of assets, the more likely this
compensation structure was adopted (78.0 percent of small institutions, 67.4 percent of medium institu-
tions, and 34.6 percent of large institutions). Study population banks with promoted programs were also
considerably more likely than institutions with nonpromoted programs to compensate vendors this way
(77.7 percent versus 26.2 percent).
Study population banks with automated overdraft programs that batch processed transactions from larg-
est to smallest were less likely than those that used other batch-processing methods to pay vendors a
percentage of income or fees earned; 56.3 percent of those that processed the largest transactions first
compensated vendors in this way, in contrast to 81.2 percent of institutions that processed the smallest
transactions first.
Of the institutions in the study that compensated vendors based on a percentage of income or fees
generated by the overdraft product, nearly half (44.7 percent) paid vendors between 10 and 19 percent.
However, compensation percentages between study population banks with promoted and nonpromoted
programs differed substantially. Although relatively few institutions with nonpromoted programs paid
vendors a percentage of income or fees, the percentages paid were much higher than those paid by insti-
tutions with promoted programs. Eighty-three percent of institutions with nonpromoted automated
programs paid vendors 20 percent or more of income or fees generated, and 41.4 percent paid more than
30 percent. By comparison, only one-third of surveyed banks with promoted automated programs paid
vendors in excess of 20 percent.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 53
Part One—Overdraft Survey VII. The Role of Vendors and Third Parties in Overdraft Practices
Table VII-4
Vendor Compensation for Automated Overdraft Programs
By Type of
Number of Study Population Banksa Automated
Percent of Column Total By Asset Size Program By Processing Method
Did your institution’s vendor $250
receive a percentage of the Less than Million to Greater Largest- Smallest-
income generated by the overdraft $250 Less than than Non- to- Not Size to-
program? All Million $1 Billion $1 Billion promoted Promoted Smallest Related Largest
Yes 181 123 50 9 9 172 37 72 72
70.6 78.1 67.4 34.6 26.2 77.7 56.3 70.6 81.2
No 76 35 24 17 26 49 29 30 17
29.4 22.0 32.6 65.4 73.8 22.3 43.7 29.4 18.8
Total with automated using vendor 257 157 74 26 35 222 66 102 89
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
If yes, what share of fees was the vendor paid in 2006?
0% 14 12 2 1 0 14 0 13 1
7.8 9.4 3.2 11.1 0.0 8.2 0.0 18.2 1.4
1-9% 21 8 11 2 0 21 4 12 5
11.5 6.2 22.6 22.2 0.0 12.1 10.3 16.2 7.5
10-14% 33 23 8 2 0 33 0 11 22
18.2 18.8 16.1 22.2 0.0 19.2 0.0 15.7 30.1
15-19% 48 27 19 2 2 46 13 14 21
26.5 21.9 38.7 22.2 17.3 27.0 34.6 19.6 29.2
20-29% 35 27 6 2 4 31 13 10 12
19.4 21.9 12.9 22.2 41.4 18.3 36.2 14.3 15.9
30% or more 30 27 3 0 4 26 7 12 12
16.6 21.9 6.5 0.0 41.4 15.2 18.9 16.0 15.9
Total with automated using 181 123 50 9 9 172 37 72 72
vendors and paying share of fees 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Did the compensation depend on a minimum level of usage by customers?
Yes 113 84 24 5 5 108 27 50 36
44.1 53.7 32.6 19.2 15.4 48.7 40.8 49.1 41.0
No 144 73 50 21 30 114 39 52 53
55.9 46.3 67.4 80.8 84.6 51.3 59.2 50.9 59.1
Total with automated using 257 157 74 26 35 222 66 102 89
vendors 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Did the compensation depend on program features?
Yes 1 0 0 1 0 1 0 1 0
0.4 0.0 0.0 3.8 0.0 0.5 0.0 1.0 0.0
No 256 157 74 25 35 221 66 101 89
99.6 100.0 100.0 96.2 100.0 99.5 100.0 99.0 100.0
Total with automated using 257 157 74 26 35 222 66 102 89
vendors 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Memo item(s):
Number of banks with automated 216 96 64 56 64 152 97 65 54
overdraft programs that do not
use vendors
Percent of study population 45.6 37.9 46.5 67.5 63.7 40.7 59.0 39.1 37.8
a
Figures do not always reconcile to totals due to the rounding of survey institutions weighted to represent the population.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 54
Part One—Overdraft Survey VIII. Growth and Profitability of Overdraft Programs
Comparing size groups, small banks compensated vendors with a greater percentage of income or fees
than large banks. For example, more than one in five banks in the smallest group (21.9 percent) paid
their vendors 30.0 percent or more of the income or fees generated by the automated program
purchased, but none of the large banks paid such a high percentage.
Among study population banks that compensated vendors based on a proportion of overdraft-generated
income, 44.1 percent structured vendor compensation on a minimum level of overdraft customer usage.
This practice was more common among small institutions (53.7 percent, compared with 32.6 percent of
medium institutions and 19.2 percent of large institutions). Forty-nine percent of institutions with
promoted programs structured compensation in this way, compared with 15.4 percent of institutions with
nonpromoted programs. Almost no banks (less than 1 percent) made vendor compensation dependent
on program features.
VII.3. Summary
More than half (54.2 percent) of the study population banks that operated automated overdraft programs
relied on third-party vendors to implement or manage the overdraft programs. Survey results show that
the use of vendors to implement and manage promoted and nonpromoted automated overdraft programs
has grown in recent years. Close to 90 percent of institutions using vendor-supplied automated overdraft
programs began using them in the six years before the survey, and 70.2 percent started working with a
vendor within the four years before the survey.
Almost two-thirds (62.9 percent) of study population banks that purchased automated overdraft
programs from a vendor used standardized (or off-the-shelf) programs. Most study population banks that
used a vendor to manage automated programs (70.6 percent) reported paying third-party vendors a
percentage of the fees or income generated by the program, typically 10 to 20 percent.
Small banks and institutions with promoted programs were more likely than other banks to rely on third-
party vendors to implement and manage the automated overdraft program; purchase and implement a
standardized overdraft program; structure vendor compensation based on a percentage of overdraft
income generated; and make vendor compensation contingent on a minimum level of income or fees
being generated by the use of the product. When institutions with nonpromoted programs paid vendors a
percentage of income or fees earned, compensation percentages were much higher than those paid by
institutions with promoted programs.
VIII. Growth and Profitability of Overdraft
Programs: The Importance of NSF-Related
Fee Income for Bank Earnings
The survey asked banks to provide estimates of annual fee income related to the processing of NSF items
for 2005, 2006, and if available, for the years 2002–2004. The survey collected reasonable estimates of
NSF-related fee income earned in 2006 for about 99 percent of study population banks. Banks represent-
ing roughly two-thirds (794 banks) of the study population reported the full five years of data requested
on annual NSF-related fee income.31
31
The survey instrument also asked for the breakdown of annual NSF-related fees into components measuring income related
to items that were paid versus income related to items that were returned as unpaid. A much smaller number of respondents were
able to provide the breakdown of NSF-related income into fees associated with paid NSF items versus fees associated with
returned NSF items. Banks representing less than one-fourth of the study population were able to provide this fee breakdown for
2006, and banks representing less than one-tenth of the study population were able to provide the breakdown back to 2002.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 55
Part One—Overdraft Survey VIII. Growth and Profitability of Overdraft Programs
Two types of ratios were used to evaluate the importance of overdraft programs for bank earnings: ratios
that compare NSF-related fee income to other measures of income (income share ratios) and ratios that
measure the flow in fee income relative to the deposit balances that generate the fees (quasi-profitability
ratios).32 The income share ratios compare NSF-related fee income to three income measures reported in
bank Call Reports: (1) service charges on deposit accounts; (2) total noninterest income; and (3) net
operating revenue, which equals the sum of net interest income and total noninterest income.33 The
quasi-profitability ratios compare NSF-related income to the volume of deposit dollars reported in bank
Call Reports:34 (1) total demand deposits; (2) total transaction deposits, which include NOW accounts;
and (3) deposit balances held in MMD accounts plus total transaction deposits.35
VIII.1. Income Share Results
Banks in the study population that reported fee-income data are estimated to have earned $1.97 billion
in NSF-related fees in 2006, representing 74.0 percent of the $2.66 billion in service charges on deposit
accounts reported by these banks in their Call Reports (see Table VIII-1).36 The share was somewhat
lower for large banks (72.6 percent) than for small and medium banks (79.5 percent and 78.1 percent,
respectively). For study population banks with automated overdraft programs, NSF-related fee income
accounted for a larger share of total service charges on deposit accounts (74.4 percent) compared with
banks that operated only linked-account and overdraft LOC programs (69.4 percent). Study population
banks that operated automated overdraft programs earned $1.77 billion in NSF fees in 2006, which
represented 90.0 percent of total NSF-related fee-income earnings estimated for the entire study popula-
tion. Among banks with automated overdraft programs, NSF-related fees made up a larger share of total
service charges on deposit accounts for banks whose programs covered ATM and POS/debit transac-
tions (75.0 percent) than for the smaller number of institutions whose programs did not (63.8 percent).
For banks having no formal programs, NSF-related fees made up 76.8 percent of Call Report deposit-
account fees.
NSF-related fee income accounted for 24.8 percent of the total noninterest income earned in 2006 by
study population banks. The share was lower for large banks, since more complex banks tended to have
more sources of noninterest income. Among study population banks that had automated overdraft
programs, the share of noninterest income attributable to NSF-related fees was higher for banks that
covered ATM and POS/debit transactions (25.4 percent), than for banks whose automated overdraft
programs did not cover these transactions (20.9 percent). NSF-related fees accounted for the largest
shares of noninterest income for banks having no formal overdraft programs (29.5 percent) and for insti-
tutions that batch processed smallest-to-largest (28.4 percent), but smaller institutions are disproportion-
ately represented among these groups of banks.
For all study population banks reporting fee income, NSF-related fee income accounted for 5.9 percent
of net operating revenues, which includes noninterest income as well as the net interest income earned
on bank assets. This share did not vary by much across the asset-size groups. However, NSF-related fees
32
Because of different factors that can affect the fee income earned by banks (such as market conditions and customer or
account characteristics), fee-income patterns reported in this study should be interpreted with caution. In addition, the fee-income
data reflected in the survey results reflects only FDIC-supervised institutions and cannot be generalized to broader bank
populations.
33
It is important to note that the latter two Call Report income items can be negative numbers (for example, because of trading
losses).
34
As noted, the survey did not collect information on the actual accounts covered by overdraft programs. Hence, the quasi-
profitability measures were constructed using Call Report items measuring total outstanding deposit balances (held in domestic
offices) for broad types of accounts: demand deposit, NOW accounts, and MMD accounts. These balance sheet items include
accounts held by all types of account holders (consumers and businesses), which can be covered by different types of overdraft
programs.
35
Deposit data used in the ratios are measured as annual average outstanding, where the beginning-of-year balances are
merger adjusted to include data for banks that were acquired during the calendar year.
36
Estimates of Call Report items for the study population were generated by weighting actual Call Report data for the sample of
reporting banks to be consistent with population estimates of the NSF-related fee income.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 56
Table VIII-1
NSF-Related Fee Income as a Share of Broader Income Measures
FDIC StuDy
By Presence of Automated
oF
Aggregate Ratios (Percent) and Dollar Program and Transactions
Aggregates ($ Millions)a By Asset Size By Programs Offered Covered By Processing Method
Has
Has Automated
Automated Program:
$250 Has Program: Does Not
Less than Million to Greater Auto- Only No Covers Cover Largest- Smallest-
$250 Less than than $1 mated Linked Formal ATM or ATM or to- Not Size to-
All Million $1 Billion Billion Program or LOC Program POS/Debit POS/Debit Smallest Related Largest
Part One—Overdraft Survey
Ratio of NSF­related fee income to:
baNk overDraFt ProgramS
Fees on deposit account 74.0 79.5 78.1 72.6 74.4 69.4 76.8 75.0 63.8 74.4 74.4 70.5
n
Noninterest income 24.8 34.7 35.3 22.7 25.1 21.0 29.5 25.4 20.9 24.1 25.8 28.4
Net operating revenue 5.9 5.7 5.7 6.0 6.7 2.7 3.9 7.1 3.4 6.8 4.9 4.0
Net operating income 21.2 25.1 22.1 20.6 24.3 9.4 14.4 25.9 10.8 23.9 18.1 14.7
Ratio of Call Report service charge fees on deposit accounts to:
Fees on deposit account 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Noninterest income 33.5 43.6 45.2 31.3 33.8 30.2 38.4 33.9 32.7 32.3 34.7 40.3
November 2008
Net operating revenue 8.0 7.2 7.3 8.2 9.0 3.9 5.1 9.4 5.4 9.1 6.6 5.6
Net operating income 28.7 31.6 28.4 28.4 32.6 13.5 18.7 34.6 16.9 32.2 24.3 20.8
Memo items(s): 2006 income ($ Millions)
NSF-related fee income 1,966.4 207.2 266.6 1,492.5 1,768.8 163.4 34.1 1,681.5 87.3 1,401.9 338.4 226.1
Fees on deposit account 2,659.0 260.8 341.6 2,056.7 2,379.0 235.6 44.4 2,242.2 136.8 1,883.7 454.6 320.7
Noninterest income 7,932.3 597.6 755.6 6,579.1 7,036.4 780.1 115.8 6,618.0 418.3 5,826.1 1,310.9 795.4
Net operating revenue 33,306.8 3,621.6 4,663.3 25,021.9 26,398.5 6,029.8 878.5 23,846.6 2,552.0 20,722.6 6,898.2 5,686.1
Net operating income 9,271.0 824.3 1,204.2 7,242.6 7,294.0 1,739.6 237.4 6,484.4 809.7 5,856.0 1,872.3 1,542.7
Total banks reporting fee income 1157 843 208 105 471 529 157 402 69 287 322 548
a
This includes fee income for paid overdrafted items, for returned overdrafted items, from initiation fees, and from maintenance fees.
57
VIII. Growth and Profitability of Overdraft Programs
Table VIII-2
NSF-Related Fee Income as a Share of Broader Income Measures by Quartiles
By Presence of Automated
Program and Transactions
Bank-Level Ratios (percent)* By Asset Size By Programs Offered Covered By Processing Method
FDIC StuDy
Has
oF
Has Automated
Automated Program:
$250 Has Program: Does Not
Less than Million to Greater Auto- Only No Covers Cover Largest- Smallest-
$250 Less than than $1 mated Linked or Formal ATM or ATM or to- Not Size to-
All Million $1 Billion Billion Program LOC Program POS/Debit POS/Debit Smallest Related Largest
NSF­related fee income share of :
Fees on deposit account
Part One—Overdraft Survey
25th percentile 67.3 70.1 65.3 55.4 69.1 63.5 71.4 70.7 60.1 67.8 64.4 69.8
baNk overDraFt ProgramS
median 79.8 80.8 79.3 71.6 80.9 77.0 84.5 81.5 74.4 78.1 80.8 80.3
n
75th percentile 90.4 92.2 88.0 87.2 89.6 90.1 94.3 89.1 90.9 89.6 87.4 93.4
Noninterest income
25th percentile 25.8 31.4 22.9 15.2 27.9 21.3 37.5 28.4 19.6 24.1 21.1 30.4
median 43.3 47.2 36.3 27.1 42.7 42.0 56.5 42.7 41.7 41.9 37.6 47.0
75th percentile 57.3 59.9 48.4 40.0 55.0 54.8 66.7 55.0 49.2 54.3 55.0 59.9
Net operating revenue
November 2008
25th percentile 3.1 3.6 2.5 2.3 4.2 2.3 4.2 4.6 3.0 2.8 3.1 3.5
median 5.4 5.7 4.6 4.4 6.6 4.2 6.4 7.3 4.4 5.4 5.7 5.4
75th percentile 8.3 8.5 7.7 7.5 9.9 6.5 8.3 10.3 5.1 8.7 8.3 7.9
Net operating income
25th percentile 10.6 11.8 8.6 7.4 17.2 7.8 11.8 19.0 8.5 11.1 10.0 9.7
median 22.1 22.5 20.1 18.8 28.2 18.3 22.3 32.6 19.0 21.5 23.6 20.7
75th percentile 41.2 44.8 36.3 27.9 50.2 33.2 35.5 51.1 35.1 40.8 44.0 38.3
Call Report deposit fee income as share of :
Noninterest income
25th percentile 37.0 40.4 32.3 24.9 36.6 33.1 50.4 37.0 35.7 37.4 32.6 38.7
median 53.6 59.6 47.7 37.9 51.1 51.2 68.9 51.0 53.1 55.1 48.7 55.9
75th percentile 70.4 73.2 63.2 50.5 69.7 68.3 79.0 70.1 66.2 70.4 69.1 71.2
Net operating revenue
25th percentile 4.0 4.6 3.5 3.8 5.9 3.0 6.0 6.3 4.0 4.2 4.7 3.9
median 7.0 7.1 6.6 6.5 8.6 5.6 7.8 8.8 6.6 7.5 6.8 6.8
75th percentile 10.4 10.6 9.5 10.0 12.3 7.9 10.9 12.6 9.2 11.7 10.3 9.6
Net operating income
25th percentile 14.9 15.5 11.8 12.7 22.9 9.6 17.8 24.7 14.6 17.6 16.5 13.3
median 28.4 28.6 28.7 25.0 37.7 21.7 28.9 41.1 24.3 30.1 31.3 27.0
75th percentile 50.9 53.3 44.6 37.5 58.7 39.0 47.9 64.9 52.4 46.7 54.7 49.5
Total banks reporting 2006 NSF- 1157 844 209 105 471 529 157 402 69 287 322 547
related fee income
58
VIII. Growth and Profitability of Overdraft Programs
* This includes fee income for paid overdrafted items, for returned overdrafted items, from initiation fees, and from maintenance fees.
Part One—Overdraft Survey VIII. Growth and Profitability of Overdraft Programs
as a share of net operating revenue were notably higher for study population banks with automated over-
draft programs (6.7 percent) compared with banks with linked-account and overdraft LOC only (2.7
percent), and compared with banks with no formal overdraft program (3.9 percent). Among banks that
had automated overdraft programs, NSF-related fee income accounted for a higher share of net operat-
ing revenue for banks whose programs covered ATM and POS/debit transactions (7.1 percent, compared
with 3.4 percent for banks whose automated overdraft programs did not cover these transactions). NSF-
related fees also were a larger share of operating revenue for banks that batch processed items largest-to-
smallest (6.8 percent; see Table VIII-1). Similar patterns are evident for the ratio of NSF-related fees to
net operating income, which equals net operating revenue less noninterest expenses.
As a validity check, it is useful to compare patterns evident for NSF-related fee-income ratios with those
found in ratios that measure the importance of total service charges on deposit accounts for broader
income flows, as estimated for the study population of banks. The deposit-service-charges to income ratios
exhibit generally comparable qualitative patterns across groups of study population banks classified by size,
type of overdraft program(s), transactions covered, and batch-processing method (see Table VIII-1).
A summary of quartile values for bank-level ratios indicates that NSF-related fee income tended to
account for a larger share of net operating revenues and net operating income for banks that had auto-
mated overdraft programs, compared with those that operated other overdraft programs (see Table
VIII-2).37 However, the quartile values also show a notable variation in fee-income ratios across banks
within the particular groups examined in this study. Thus, aggregate ratios evident for a group are not an
accurate representation for all banks in the group.
VIII.2. Fee Income as Shares of Deposits
Income shares may indicate little about the overall volume of income generated by NSF-related activi-
ty.38 In contrast, the quasi-profitability ratios presented in this section measure the amount of NSF-
related fee income accrued on a per-deposit-dollar basis. Thus, a higher ratio implies a larger flow of
income as a share of the deposits from which fees are generated. For the study population as a whole,
NSF-related fee income in 2006 equaled 4.2 percent of the average outstanding demand-deposit balances
and 2.7 percent of average transaction-account balances (see Table VIII-3). For both deposit measures,
larger banks had higher fee income per average dollar of deposits. For the broader measure of deposits
that included MMDs, NSF-related fees equaled 85 basis points of average deposit balances, and there
was less variation across the size groups.
As reported in Table VIII-3, NSF-related-fee income-to-deposit ratios were higher for banks that oper-
ated automated overdraft programs. For banks with automated programs, NSF-related fees reported for
2006 were 5.2 percent of average demand deposits and 3.4 percent of average transaction-account
balances; for banks having linked-account and overdraft LOC programs only, these ratios were 1.5
percent and 0.9 percent, respectively. For banks having no formal programs, NSF-related fees equaled
1.5 percent of demand deposit balances and 0.9 percent of transaction-account balances. Among study
population banks that operated automated overdraft programs, NSF-related fees per dollar of deposits
were also higher for those whose programs covered ATM or POS/debit transactions than for institutions
whose programs did not (5.6 percent and 3.6 percent for demand deposits and transaction deposits,
respectively, versus 2.4 percent and 1.7 percent for banks whose automated programs did not cover
ATM or POS/debit transactions). Study population banks that batch processed transactions largest-to-
smallest had a higher fee-to-deposit ratio than banks that batch processed smallest-to-largest or banks
that did not batch process by size. As with the income-share measures, the ratios of total service charges
on deposit accounts to deposit account balances, estimated for the study population of banks, exhibited
37
It is important to also examine central tendencies in bank-level ratios since larger institutions (in this case, institutions report-
ing more income) are given greater weight in the construction of cohort-level aggregates.
38
For example, when a broader income measure becomes negative because of losses, the fee-income share ratio is not
meaningful.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 59
Table VIII-3
NSF-Related Fee Income Ratios to Deposits Outstanding
FDIC StuDy
By Presence of Automated
oF
Aggregate Ratios (Percent) and Dollar Program and Transactions
Aggregates ($ Millions)a By Asset Size By Programs Offered Covered By Processing Method
Has
Has Automated
$250 Automated Program:
Million Has Program: Does Not
Less than to Less Greater Auto- Only No Covers Cover Largest- Smallest-
$250 than $1 than $1 mated Linked or Formal ATM or ATM or to- Not Size to-
All Million Billion Billion Program LOC Program POS/Debit POS/Debit Smallest Related Largest
Part One—Overdraft Survey
Ratio of NSF­related fee income to:
baNk overDraFt ProgramS
Demand deposits 4.17 2.00 3.13 5.27 5.23 1.48 1.46 5.57 2.41 5.73 3.14 1.89
n
Transaction deposits 2.69 1.11 1.90 3.69 3.40 0.94 0.92 3.58 1.72 3.79 1.98 1.19
Trans. and MMD deposits 0.85 0.72 0.89 0.86 0.95 0.42 0.60 1.00 0.47 0.98 0.71 0.54
Ratio of Call Report service charge fees on deposit accounts to:
Demand deposits 5.63 2.52 4.02 7.26 7.04 2.13 1.90 7.43 3.78 7.69 4.22 2.69
Transaction deposits 3.64 1.40 2.43 5.08 4.57 1.36 1.20 4.77 2.69 5.09 2.66 1.69
Trans. and MMD deposits 1.15 0.91 1.14 1.19 1.27 0.60 0.79 1.33 0.74 1.32 0.95 0.77
November 2008
Memo items(s): Year­end 2006 Deposits ($ Millions)
Demand deposits 45,801.2 10,474.3 7,941.7 27,385.2 32,665.2 10,911.9 2,224.0 29,482.1 3,183.1 23,759.5 10,237.5 11,804.2
Transaction deposits 70,309.7 18,658.0 13,015.3 38,636.4 49,992.5 16,800.2 3,517.0 45,575.6 4,416.8 35,463.1 16,450.6 18,396.0
Trans. and MMD deposits 232,926.7 28,863.4 30,032.0 174,031.3 188,336.6 39,157.5 5,432.6 169,632.3 18,704.3 143,915.9 47,034.6 41,976.3
NSF-related fee income 1,966.4 207.2 266.6 1,492.5 1,768.8 163.4 34.1 1,681.5 87.3 1,401.9 338.4 226.1
($ millions 2006)
Total banks reporting fee income 1157 843 208 105 471 529 157 402 69 287 322 548
a
This includes fee income for paid overdrafted items, for returned overdrafted items, from initiation fees, and from maintenance fees.
Fee income is measured as a ratio to average deposit balances, where beginning of period deposits are calculated on a merger adjusted basis.
60
VIII. Growth and Profitability of Overdraft Programs
Part One—Overdraft Survey VIII. Growth and Profitability of Overdraft Programs
Table VIII-4
NSF-Related Fee Income Ratios to Deposits Outstanding by Quartiles
Bank-Level Ratios (Percent)a By Asset Size By Programs Offered
$250
Less than Million to Greater Has Only
$250 Less than than Automated Linked or No Formal
All Million $1 Billion $1 Billion Program LOC Program
NSF­related fee income share of :
Demand deposits
25th percentile 1.31 1.31 1.22 1.94 1.99 0.86 1.35
median 2.10 2.04 2.42 3.47 3.23 1.66 1.80
75th percentile 3.65 3.27 5.50 6.01 5.03 2.47 3.15
Transaction deposits
25th percentile 0.69 0.67 0.74 1.19 1.04 0.54 0.76
median 1.14 1.05 1.37 2.44 1.70 0.85 1.08
75th percentile 1.93 1.64 2.53 3.94 2.62 1.33 1.70
Trans. and MMD deposits
25th percentile 0.42 0.46 0.34 0.33 0.56 0.32 0.61
median 0.76 0.76 0.68 0.77 1.05 0.57 0.88
75th percentile 1.27 1.25 1.30 1.28 1.53 0.94 1.48
Call Report service charges on deposit accounts:
Demand deposits
25th percentile 1.71 1.62 1.80 3.02 2.67 1.23 1.73
median 2.85 2.57 3.52 5.09 4.03 2.15 2.50
75th percentile 4.55 4.03 6.50 8.36 6.05 3.30 4.08
Transaction deposits
25th percentile 0.95 0.88 1.07 1.89 1.39 0.72 0.98
median 1.50 1.36 2.07 3.31 2.26 1.09 1.37
75th percentile 2.44 2.03 3.44 5.10 3.17 1.72 2.31
Trans. and MMD deposits
25th percentile 0.58 0.59 0.53 0.62 0.77 0.42 0.79
median 0.96 0.97 0.93 0.99 1.36 0.74 1.02
75th percentile 1.57 1.55 1.78 1.75 1.95 1.19 2.01
Total banks reporting 2006 NSF-related 1157 843 209 105 471 529 157
fee income
a
This includes fee income for paid overdrafted items, for returned overdrafted items, from initiation fees, and from maintenance fees.
Fee income is measured as a ratio to average deposit balances, where beginning of period deposits are calculated on a merger adjusted basis.
qualitatively similar patterns across groups of banks classified by size, type of overdraft program(s), trans-
actions covered, and batch-processing method (see Table VIII-3).
Analysis of bank-level quasi-profitability ratios by quartile shows that median fee-income profitability
ratios also tended to be higher for banks that operated automated overdraft programs. However, median
ratios were notably lower than the aggregate measures for the whole population discussed above.39 The
median bank-level ratio of NSF-related fees to transaction deposits was only 1.1 percent, compared with
the ratio of 2.7 percent as calculated for the aggregate study population. This result reflects the large
proportion of smaller banks in the population and the relationship between NSF-related fee income and
bank size: Median NSF-related fee income-to-deposit ratios tended to be higher for larger banks. The
analysis also revealed a fair amount of variation in bank-level ratios measuring NSF-related fees per
dollar of deposits for 2006. For instance, 25.0 percent of the banks had NSF fee-to-transaction-deposit
ratios of more than 1.9 percent, and 25.0 percent had ratios of 0.7 percent or less (see Table VIII-4).
39
This result reflects the higher ratios for large banks.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 61
Part One—Overdraft Survey VIII. Growth and Profitability of Overdraft Programs
VIII.3. Charged-Off and Restructured Accounts
The survey also asked banks to provide estimates of the annual number and dollar value of deposit
accounts that were charged off or restructured during calendar year 2006. The survey collected reason-
able estimates of charged-off and restructured accounts for banks representing almost 98 percent of the
study population banks, but only 73.0 percent of year-end domestic deposit dollars estimated for the
study population in 2006. This disparity is driven by the fact that a number of large institutions did not
provide this information.
Banks in the study population reporting these data are estimated to have charged off 401,000 accounts
totaling $124.2 million or an average negative balance charged off of around $310 per account. While
this average balance did not vary across bank-size groups, it was somewhat higher for banks that operated
automated overdraft programs ($312.00), particularly for those programs that covered ATM or POS/
debit transactions ($322.40 if the automated program covered ATM or POS/debit transactions versus
$201.40 if ATM or POS/debit transactions were not covered) (see Table VIII-5).
Call Reports include deposit account charge-offs under the “residual charge-offs not elsewhere classified
(n.e.c.)” items.40 Charged-off deposit account dollars reported by study population banks represented
32.9 percent of $377.1 million of gross charge-offs n.e.c., and 12.6 percent of total gross loan and lease
charge-offs reported by these banks in 2006 Call Reports.41 Deposit account charge-offs accounted for a
larger share of Call Report charge-offs for banks that operated an automated overdraft program (particu-
larly for those having programs that covered ATM and POS/debit transactions) and for banks that batch
processed transactions largest-to-smallest. For study population banks with automated overdraft
programs, account charge-offs equaled 35.8 percent of gross charge-offs n.e.c., compared with 12.8
percent for banks that operated only linked-account programs, overdraft LOC programs, or both, and
17.7 percent for banks having no formal program.
Reported charged-off accounts equaled less than one-fifth of a percent (18 basis points) of average trans-
action deposits outstanding. Again, the ratio of account charge-offs to transaction-account balances was
higher for banks operating automated overdraft programs, particularly those that covered ATM or
POS/debit transactions and for banks that batch processed starting with the largest transaction. Report-
ing study population banks that operated automated programs are estimated to have charged off more
than 375,000 accounts having negative balances equaling $117.3 million in 2006. These charge-offs
represented 94.4 percent of the dollar volume of accounts charged off by the study population reporting
these data.
Reporting study population banks restructured 15,600 accounts with negative balances totaling $9.8
million, or an average of $624 per restructured account. The average size of restructured accounts was
higher for smaller banks ($722 for small banks versus $576 for large banks). Banks that operated auto-
mated overdraft programs accounted for the vast majority (96 percent) of reported restructured accounts
(15,000 accounts) and had an average of $572 per restructured account. Restructured account balances
equaled less than 2 basis points measured as a share of average transaction-account balances in 2006.
40
Charged-off accounts are classified as a loan charge-off in bank Call Reports. Deposit account charge-offs are not a specific
category in the Call Report; rather they are included in two residual charge-off categories where banks report other consumer
loans charged off that are n.e.c. or other (nonconsumer) loans charged off that are n.e.c. Because the survey did not collect sepa-
rate information on consumer account charge-offs and other account charge-offs, the two Call Report items were aggregated to
measure charge-offs n.e.c.
41
Estimates of Call Report items for the study population were generated by weighting actual Call Report data for the sample of
reporting banks to be consistent with population estimates of the deposit account charge-offs.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 62
Table VIII-5
Charged-Off and Restructured Deposit Accounts in 2006
By Presence of Automated
Aggregate Ratios (Percent) Program and Transactions
Dollar Aggregates ($ Millions) By Asset Size By Programs Offered Covered By Processing Method
FDIC StuDy
Has
oF
Has Automated
$250 Automated Program:
Million Has Program: Does Not
Less than to Less Greater Auto- Only No Covers Cover Largest- Smallest-
$250 than $1 than $1 mated Linked or Formal ATM or ATM or to- Not Size to-
All Million Billion Billion Program LOC Program POS/Debit POS/Debit Smallest Related Largest
Volume of overdrafted account balances charged off as percent of :
Gross charge-off on other 32.9 23.8 33.4 34.3 35.8 12.8 17.7 36.6 26.5 37.0 30.1 18.9
Part One—Overdraft Survey
consumer and other loans n.e.c.
baNk overDraFt ProgramS
Gross charge-offs on all loans and 12.6 8.2 10.8 13.8 14.3 3.7 5.6 14.8 9.4 15.3 10.6 5.9
n
leases
Average transactions deposits 0.18 0.06 0.13 0.27 0.25 0.03 0.05 0.26 0.13 0.28 0.13 0.06
Volume of overdrafted account balances restructured as percent of:
NSF-related fee income 0.67 1.00 1.61 0.37 0.68 0.49 1.12 0.70 0.42 0.58 0.59 1.15
Average transactions deposits 0.014 0.011 0.030 0.010 0.018 0.005 0.010 0.020 0.007 0.016 0.012 0.014
Dollar volume ($ Millions)
November 2008
Volume of overdrafted account 124.2 10.7 17.4 96.0 117.3 5.1 1.8 110.8 6.5 92.0 21.3 10.9
balances charged off
Overdraft drafted accounts 9.8 2.1 4.0 3.7 8.6 0.8 0.4 8.2 0.4 5.3 1.9 2.5
restructured
NSF-related fee income 1,462.8 207.2 246.4 1,009.2 1,266.5 162.2 34.1 1,179.7 86.8 918.9 324.1 219.7
Services charges on deposit 1,927.2 260.8 307.0 1,359.4 1,650.1 232.7 44.4 1,521.5 128.6 1,182.5 438.2 306.5
accounts
Gross charge-off on other 377.1 45.1 52.2 279.8 327.3 39.4 10.4 302.8 24.5 249.0 70.8 57.4
consumer and other loans nec
Gross charge-offs on all loans and 986.8 130.8 161.0 695.0 819.0 135.1 32.7 750.1 69.0 600.4 201.7 184.7
leases
Transaction deposits year-end 2006 65,100.2 18,658.0 12,239.1 34,203.2 45,130.6 16,452.6 3,517.0 40,783.5 4,347.1 31,219.3 15,955.3 17,925.6
Memo item(s):
Number of accounts charged off 401.0 35.3 55.7 310.1 375.9 18.4 6.8 343.6 32.3 293.5 71.3 36.2
(thousands)
Average amount charged off ($s) 309.6 304.4 312.6 309.7 312.0 274.6 273.0 322.4 201.4 313.5 298.7 300.1
Number of accounts restructured 15.6 2.9 6.3 6.5 15.0 0.3 0.4 14.4 0.6 8.7 3.3 3.6
(thousands)
Average size of restructured 623.8 722.0 628.2 575.6 572.4 2775.3 1037.1 571.3 596.9 607.3 584.9 698.5
account ($s)
Other consumer and other 38.2 34.5 32.4 40.3 40.0 29.2 31.9 40.4 35.5 41.5 35.1 31.1
charge-offs as a share of total loan
63
VIII. Growth and Profitability of Overdraft Programs
charge-offs (percent)
Total banks reporting fee income 1,142 843 200 98 457 528 157 389 68 279 320 544
and account charge-off data
Table VIII-6
Net NSF-Related Fee Income Ratios
FDIC StuDy
By Presence of Automated
oF
Aggregate Ratios (Percent) Program and Transactions
Dollar Aggregates ($ Millions) By Asset Size By Programs Offered Covered By Processing Method
Has
Has Automated
$250 Automated Program:
Million Has Program: Does Not
Less than to Less Greater Auto- Only No Covers Cover Largest- Smallest-
$250 than $1 than $1 mated Linked or Formal ATM or ATM or to- Not Size to-
All Million Billion Billion Program LOC Program POS/Debit POS/Debit Smallest Related Largest
Part One—Overdraft Survey
Volume of overdrafted account balances charged off as percent of:
baNk overDraFt ProgramS
NSF-related fee income 8.49 5.18 7.07 9.52 9.26 3.11 5.40 9.39 7.50 10.01 6.57 4.94
n
Services charges on deposit 6.44 4.12 5.67 7.06 7.11 2.17 4.15 7.28 5.06 7.78 4.86 3.54
accounts
NSF­related fee income net of accounts charged off as a percent of:
Service charges on deposit 69.5 75.3 74.6 67.2 69.6 67.5 72.7 70.3 62.4 69.9 69.1 68.1
accounts
November 2008
Net noninterest income 25.0 32.9 32.3 22.6 25.7 20.8 27.9 26.3 19.8 25.0 23.9 27.2
Net operating revenue 5.12 5.43 5.13 5.06 5.95 2.65 3.67 6.36 3.20 5.99 4.48 3.75
Average demand deposits 3.04 1.90 2.89 3.55 3.72 1.45 1.38 3.91 2.30 3.75 2.89 1.82
Average transactions deposits 1.99 1.06 1.74 2.56 2.46 0.93 0.87 2.56 1.64 2.56 1.82 1.14
Dollar volume ($ millions)
Overdrafted account balances 124.2 10.7 17.4 96.0 117.3 5.1 1.8 110.8 6.5 92.0 21.3 10.9
charged off
NSF-related fee income 1,462.8 207.2 246.4 1,009.2 1,266.5 162.2 34.1 1,179.7 86.8 918.9 324.1 219.7
Net NSF-related fee income 1,338.6 196.5 229.0 913.1 1,149.2 157.1 32.3 1,069.0 80.3 826.9 302.8 208.9
Services charges on deposit 1,927.2 260.8 307.0 1,359.4 1,650.1 232.7 44.4 1,521.5 128.6 1,182.5 438.2 306.5
accounts
Net noninterest income 5,348.6 597.6 708.4 4,042.6 4,477.4 755.4 115.8 4,072.1 405.3 3,310.7 1,269.7 768.2
Net operating revenue 26,122.8 3,621.6 4,466.9 18,034.4 19,320.4 5,924.0 878.5 16,814.5 2,505.9 13,807.1 6,753.1 5,562.6
Demand deposits, year-end 2006 42,860.5 10,474.3 7,448.5 24,937.8 29,981.1 10,655.4 2,224.0 26,852.8 3,128.3 21,503.6 9,912.3 11,444.7
Transaction deposits year-end 2006 65,100.2 18,658.0 12,239.1 34,203.2 45,130.6 16,452.6 3,517.0 40,783.5 4,347.1 31,219.3 15,955.3 17,925.6
Memo item(s):
Total banks reporting fee income 1,142 843 200 98 457 528 157 389 68 279 320 544
and account charge-off data
64
VIII. Growth and Profitability of Overdraft Programs
Part One—Overdraft Survey VIII. Growth and Profitability of Overdraft Programs
VIII.4. Net Fee-Income Ratios
Table VIII-6 reports NSF-related fee-income measures that are adjusted to reflect charged-off account
balances for the segment of the study population that reported charge-off information. Banks that
reported these data had $1.46 billion in NSF-related fee income and account charge-offs that equaled
8.5 percent of this income. Account charge-offs measured as a share of fee income were higher for banks
in the larger asset-size groupings; for banks that had automated overdraft programs, particularly those
that covered ATM and POS/debit transactions; and for banks that batch processed items largest-to-
smallest (compared with other batch-processing methods). Similar patterns are evident for charge-offs
measured relative to the Call Report item measuring service charges on deposit accounts.
Although their absolute levels were somewhat lower, NSF-related fee-income ratios that net out
account charge-offs exhibited qualitatively similar patterns to the gross ratios examined in Sections
VIII.1 and VIII.2. In particular, net NSF-related fees as a share of operating revenues varied little across
the bank-size groups. However, net NSF-related fees as a share of net operating revenues were higher
for banks that had automated overdraft programs (5.1 percent for all reporting banks versus 6.0 percent
for reporting banks with automated programs), especially those covering ATM or POS/debit transac-
tions (6.4 percent). In contrast, net NSF-income ratios were 2.7 percent for banks that operated only
linked-account programs, overdraft LOC programs, or both, and 3.7 percent for banks with no formal
overdraft program.
Net NSF-related fees measured relative to deposits were also higher for banks that operated automated
overdraft programs (2.0 percent of transaction deposit dollars for all reporting banks versus 2.5 percent
for reporting banks with automated programs), and particularly for those whose automated program
covered ATM and POS/debit transactions (2.6 percent if ATM or POS/debit transactions were covered
versus 1.6 percent if ATM and POS/debit transactions were not covered). In contrast, reporting banks
with only linked account or overdraft LOCs (or both) had net NSF-related fee income equal to 93 basis
points of transaction deposits, and reporting banks with no formal program had a net fee-income-to-
deposit ratio of 87 basis points. Thus, although banks that operated automated programs had higher
account charge-offs, fee income measured net of these charge-offs also tended to represent a larger share
of operating revenues and a higher percentage of transaction-account balances.
VIII.5. Trends in NSF-Related Fee Income
As noted above, five years of fee-income data were available for banks representing about two-thirds
(794 banks) of the study population. This section summarizes trends in fee income for these institutions.
For this purpose, the importance of NSF-related fees as a component of income is measured using the
ratio of NSF-related fees to net operating revenues, and the profitability of programs generating NSF-
related fee income is measured relative to average outstanding transaction deposits.
As illustrated in Table VIII-7, there was a modest increase in NSF-related fee income as a share of net
operating revenue among study population institutions represented by banks reporting fee income in the
five-year period evaluated by the survey (from 5.5 percent in 2002 to 6.2 percent in 2006). The upward
trend reflects increases evident for banks operating automated overdraft programs. For study population
banks that had an automated overdraft program in place for the entire five-year period, NSF-related fee
income increased to 7.3 percent of operating revenue in 2006, from 5.8 percent in 2002. These institutions
tended to include larger banks that, as noted above, accounted for a disproportionate share of income esti-
mated for the study population. In contrast, for banks that did not operate an automated program but had
linked accounts or overdraft LOCs (or both) during the 2002–2006 period, the ratio of NSF-related fee
income to net operating revenue declined to 2.7 percent in 2006, from 3.5 percent in 2002.
NSF-related fees measured as a percentage of average transaction deposits indicate similar patterns for
banks reporting the fee-income trend data. For banks that had an automated program during the entire
2002–2006 period, the ratio of NSF-related fees to transaction deposits increased from 2.7 percent in
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 65
Part One—Overdraft Survey VIII. Growth and Profitability of Overdraft Programs
Table VIII-7
Trends in NSF-Related Fee Income: 2002–2006
By Year
Aggregate Ratios (percent)a
Classified by Programs Offered All 2002 2003 2004 2005 2006
NSF­related fee income ratio to net operating revenue (percent)
Has automated program 312 6 6.62 6.91 7.13 7.01
Started program after 2001 212 6.24 6.96 7.27 7.38 6.72
Had program in 2001 100 5.75 6.28 6.55 6.89 7.33
Offers linked or lines 380 3.38 3.13 2.89 2.67 2.66
Started program(s) after 2001 17 2.15 2.85 2.57 2.05 1.65
Had program(s) in 2001 363 3.45 3.14 2.9 2.71 2.73
No formal program 103 4.85 5.31 5.38 5.06 4.78
All banks reporting fee income trends 794 5.51 5.95 6.13 6.29 6.23
NSF­related fee income as percent of average transactions deposits
Has automated program 312 2.64 3.06 3.34 3.6 3.91
Started program after 2001 212 2.62 3.30 3.98 4.18 4.58
Had program in 2001 100 2.66 2.83 2.84 3.16 3.40
Offers linked or lines 380 0.99 0.95 0.93 0.84 0.87
Started program(s) after 2001 17 0.61 0.77 0.74 0.64 0.54
Had program(s) in 2001 363 1.02 0.97 0.94 0.86 0.89
No formal program 103 1.18 1.18 1.15 1.06 1.12
All banks reporting fee income trends 794 2.20 2.46 2.64 2.80 3.03
Fee income in millions of dollars
Has automated program 312 839.690 1,008.944 1,181.678 1,339.318 1,498.429
Started program after 2001 212 442.0 529.1 614.4 679.7 751.8
Had program in 2001 100 397.7 479.8 567.3 659.6 746.6
Offers linked or lines 380 101.9 108.5 115.7 112.0 118.1
Started program(s) after 2001 17 3.6 5.2 5.3 5.1 5.0
Had program(s) in 2001 363 98.3 103.3 110.4 106.9 113.1
No formal program 103 20.5 23.1 24.4 24.0 24.1
All banks reporting fee income trends 794 962.1 1,140.5 1,321.7 1,475.3 1,640.6
a
Ratios of aggregate dollar amounts for the indicated group of banks.
2002 to 3.4 percent in 2006; while the comparable ratio for banks that operated only linked accounts or
overdraft LOCs (or both) edged down from 1.0 percent in 2002 to 0.9 percent in 2006. For study institu-
tions that had no formal programs during 2002–2006, NSF-related fee income as a percentage of average
transaction deposits was fairly flat. These institutions, which tended to be smaller, accounted for only
about 2 percent of NSF-related fee income estimated for study population banks reporting complete fee-
income trend data.
The analysis of bank-level trends in fee-income ratios, as reported in Table VIII-8, indicates less distinct
trends in median ratios for banks that operated automated programs during the entire five-year period.
At the same time, the median of both fee-income ratios increased for banks that adopted automated
programs between 2002 and 2006. (The median ratio of fee income to operating revenue rose from 5.6
percent in 2002 to 6.5 percent in 2006; the median ratio of fee income to transaction deposits rose from
1.1 percent in 2002 to 1.7 percent in 2006.) However, because banks in this group were adopting
programs at a fairly steady pace, these patterns do not measure the effect program adoption had on NSF-
related fee income.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 66
Part One—Overdraft Survey VIII. Growth and Profitability of Overdraft Programs
Table VIII-8
Trends in NSF-Related Fee Income Ratios by Quartiles
Banks w/ NSF-Related Fee Income Ratio NSF-Related Fee Income as
Complete to Net Operating Revenue (Percent) Percent of Avg Transactions Deposits
Income
Classified by Programs Offered Data 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006
25th percentile 25th percentile
Has automated program 312 3.93 4.29 4.56 4.65 4.36 0.9 0.87 1.09 1.09 1.1
Started program after 2001 212 3.4 3.87 3.75 4.05 4.17 0.72 0.66 0.87 1.01 1.05
Had program in 2001 100 4.92 5.14 5.05 5.41 5.14 1.43 1.52 1.54 1.31 1.24
No automated program; had linked 380 2.68 2.54 2.42 2.37 2.52 0.57 0.57 0.56 0.57 0.54
or LOC program in 2006
Adopted program(s) after 2001 17 0.76 1.38 1.04 1.26 1.29 0.22 0.24 0.26 0.35 0.32
Had program(s) in 2001 363 2.74 2.74 2.6 2.51 2.6 0.57 0.57 0.57 0.57 0.56
No formal program 103 4.76 4.84 5.08 5.65 5.57 0.74 0.89 0.86 0.85 0.95
Total banks with complete fee 795 3.42 3.66 3.72 3.63 3.67 0.67 0.66 0.69 0.66 0.76
income dataa
Median Median
Has automated program 312 5.69 6.44 6.7 7.18 7.19 1.42 1.56 1.62 1.74 1.75
Started program after 2001 212 5.57 5.99 6.2 6.67 6.47 1.14 1.35 1.38 1.63 1.67
Had program in 2001 100 8.01 7.88 8.64 7.79 7.72 1.98 2.29 2.32 1.98 2.44
No automated program; had linked 380 4.6 4.62 4.64 4.51 4.38 0.99 0.94 0.88 0.85 0.87
or LOC program in 2006
Adopted program(s) after 2001 17 5.67 6.01 5.49 4.87 3.04 0.91 0.99 0.91 0.96 1.05
Had program(s) in 2001 363 4.57 4.62 4.64 4.51 4.38 0.99 0.94 0.88 0.85 0.87
No formal program 103 6.77 7.75 7.78 7.34 6.99 1.32 1.36 1.47 1.31 1.2
Total banks with complete fee 795 5.23 5.7 5.56 5.54 5.86 1.15 1.23 1.19 1.14 1.18
income dataa
75th percentile 75th percentile
Has automated program 312 8.88 9.93 10.66 10.89 10.61 2.39 2.59 2.6 2.8 2.8
Started program after 2001 212 7.35 8.61 10.35 10.22 10.56 1.64 2.17 2.13 2.08 2.46
Had program in 2001 100 10.81 10.99 11.53 12.92 11.63 3.97 3.84 3.51 3.91 4.27
No automated program; had linked 380 7.12 7.13 6.7 6.48 6.41 1.5 1.6 1.4 1.26 1.33
or LOC program in 2006
Adopted program(s) after 2001 17 6.37 8.37 6.55 5.51 5.6 1.06 1.41 1.14 1.01 1.2
Had program(s) in 2001 363 7.21 7.13 7.22 6.53 6.41 1.53 1.63 1.4 1.26 1.35
No formal program 103 9.09 10.63 10.28 11.6 11.01 1.57 1.78 1.77 2 1.92
Total banks with complete fee 795 8.34 8.72 8.96 8.58 8.64 1.78 1.89 1.9 1.85 1.93
income dataa
a
Figures only include banks reporting complete NSF-related fee income data for 2002-2006.
VIII.6. NSF-Related Fee Income and the Adoption of Automated Overdraft Programs
To examine how NSF-related income changed with the adoption of automated overdraft programs, study
population banks that adopted these programs sometime during the 2002–2006 period were classified in
terms of the year they adopted the programs. Given the year of program adoption, subsequent years of
fee income were identified to measure fee-income charges in each year after program implementation.42
Figure VIII-1 illustrates that the median study population bank adopting an automated overdraft
42
Changes in fee-income ratios are measured relative to a bank’s ratio for the calendar year prior to the program implementa-
tion (for at least six months). It should also be noted that because bank program adoptions were distributed fairly evenly across
the five-year period, the five years of fee-income data yielded fewer observations for later years of program operation. For exam-
ple, there are four years of subsequent fee-income data for a bank that started its program in late 2002, but there are only three
subsequent years of fee-income data for an institution that started a program in late 2003).
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 67
Part One—Overdraft Survey VIII. Growth and Profitability of Overdraft Programs
program between 2002 and 2006 (and reporting fee- Figure VIII-1
income trend data) had an increase in the ratio of
NSF-related fees to net operating revenue of more Changes in the Ratio of NSF-Related Fee Income
than 20 percent in the first year of operation, and that to Net Operating Revenue
subsequent increases were smaller. As indicated by the 2
patterns for the 75th and 25th percentiles, there is 1.8
Ratio in indicated year divided by base-year ratio
substantial variation in fee-income share changes subse- 1.6
quent to the adoption of automated overdraft programs.
1.4
While a sizable segment of institutions saw even larger
increases in the share of net operating revenues coming 1.2
from NSF-related fees, another segment did not experi- 1
ence much of an income-share increase after the estab-
0.8
lishment of this type of program.
0.6 25th percentile
Similar patterns are evident for changes in NSF-related 0.4 Median
fee income as a percentage of (average) transaction 0.2
75th percentile
deposits. As depicted in Figure VIII-2, the median
0
change in this fee-income ratio was positive in the first T-2 T-1 T=base year T+1 T+2 T+3 T+4
year an automated program was implemented, but there Year relative to year prior to adoption of automated program (base year)
was a wide range in profitability trends subsequent to
the adoption of automated overdraft programs by study
population banks. Figure VIII-2
Changes in the Ratio of NSF-Related Fee Income
VIII.7. Summary to Average Transaction Deposits
This section examined the importance of NSF-related 3
fees for bank earnings and how these fees change after
Ratio in indicated year divided by base-year ratio
the adoption of an automated overdraft program. Banks 2.5 25th percentile
in the study population are estimated to have earned Median
$1.97 billion in NSF-related fees in 2006, representing 2
75th percentile
74 percent of the $2.66 billion in service charges on
deposit accounts reported in the bank Call Reports. 1.5
Study population banks that operated automated over-
draft programs earned $1.77 billion in NSF fees in
1
2006, accounting for 90.0 percent of total NSF-related
fee income earned by the entire study population.
0.5
NSF-related fee income as a share of net operating
0
revenue was higher for study population banks with T-2 T-1 T=base year T+1 T+2 T+3 T+4
automated overdraft programs (6.7 percent), compared Year relative to year prior to adoption of automated program (base year)
with banks that had only linked-account or overdraft
LOC programs or both (2.7 percent), or banks with no
formal overdraft program (3.9 percent). Among banks
with automated overdraft programs, NSF-related fee income was a higher share of net operating revenue
for banks whose programs covered ATM or POS/debit transactions (7.1 percent, compared with 3.4
percent for banks whose automated overdraft programs did not cover these transactions). NSF-related
fees also accounted for a larger share of operating revenues for banks that batch processed transactions
largest-to-smallest (6.8 percent).
The profitability of overdraft-related services, as measured by the ratio of NSF-related fee income to
average transaction-account balances, also varied with the types of overdraft programs operated. For the
study population as a whole, NSF-related fees were 2.7 percent of the average transaction-account
balances outstanding during 2006. Banks that operated automated overdraft programs had a higher ratio
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 68
Part Two—Micro-Level Data VIII. Growth and Profitability of Overdraft Programs
of NSF-related fees to outstanding transaction deposits (3.4 percent) than those that had only linked
accounts or overdraft LOCs or both (0.9 percent), or those that had no formal program in place (0.9
percent). And among banks operating automated overdraft programs, those whose program covered
ATM and POS/debit transactions had a higher fee-to-deposit ratio than those whose program did not
cover these transactions (3.6 percent versus 1.7 percent). Study population banks that batch processed
transactions largest-to-smallest had a higher profitability ratio than banks that batch processed smallest-
to-largest or not on a size basis (3.8 percent, 1.2 percent, and 2.0 percent, respectively).
Banks representing roughly two-thirds of the $2.66 billion in 2006 deposit-account service charges esti-
mated for the study population reported charging off $124.2 million in deposit-account balances on
401,000 accounts in 2006. Reporting banks that operated automated overdraft programs accounted for
$117.3 million or 94.0 percent of the charged-off account balances reported. Charged-off accounts were
a larger share of gross loan and lease charge-offs (14.3 percent) for banks with automated overdraft
programs than for reporting banks that operated only linked accounts or overdraft LOCs or both
(3.7 percent), or had no formal program in place (5.6 percent). Despite the larger share of charged-off
account balances, the shares of NSF-related fee income net of account charge-offs relative to both net
operating revenue and outstanding transaction deposits were still higher for banks with automated over-
draft programs (6.0 percent of net operating revenue and 2.5 percent of transaction deposits). Banks with
only linked-accounts or overdraft LOC programs (or both) reported net NSF-related fee income equal to
2.7 percent of net operating revenue and 0.9 percent of average outstanding transaction deposits.
An examination of trends in the importance of NSF-related fees indicates a modest increase in NSF-
related fee income as a share of net operating revenue (from 5.5 percent in 2002 to 6.2 percent in 2006)
among study population institutions reporting five years of NSF-related fee income. The upward trend
was driven by banks operating automated overdraft programs. For study population banks that had an
automated program in place for the entire five-year period, this fee-income share increased from 5.8
percent in 2002 to 7.3 percent in 2006. In contrast, NSF-related fee income declined as a share of net
operating revenue (from 3.5 percent in 2002 to 2.7 percent in 2006) for banks that did not operate
automated overdraft programs but had only linked-account or overdraft LOC programs (or both) during
this period.
Analysis of banks that adopted automated overdraft programs during 2002 through 2006 (and reported
fee-income trend data) indicates that the median study population bank adopting an automated over-
draft program had an increase in the ratio of NSF-related fees to net operating revenue of more than
20 percent in the first year of operation, and that subsequent increases were smaller. Similarly, patterns
are evident for changes in NSF-related fee income as a percentage of (average) outstanding transaction
deposits. However, although on average the adoption of automated overdraft programs was associated
with increases in both NSF-related fee-income ratios, there was substantial variation in fee-income
trends among banks that started programs of this type.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 69
Part Two—Micro-Level Data
IX. Micro-Level Data: Consumer
Overdraft Usage
This section analyzes actual coverage of overdraft programs by customers of 39 banks reporting the
micro-level customer and transaction data (micro-data).43 In particular, this section focuses on the use
of automated overdraft programs. It provides descriptive information about the types and median size of
NSF-related transactions, and reports differences in overdraft activity across different income levels and
age groups.
As described in the methodology, the micro-data were obtained from a nonrandom sample of 39 insti-
tutions that emphasized large retail banks to ensure a wide coverage of consumer accounts. Micro-data
banks were asked to provide comprehensive customer-level information, including the type of the
account, the type of overdraft coverage that applied to the account, the ZIP code location of the account
holder, the account holder’s year of birth, the date the account was opened, and the average account
balance during the previous 12 months. The data request was designed to mask any customer informa-
tion that could raise privacy concerns.
Micro-data banks were also asked to report individual NSF transactions processed during a 12-month
period under an automated overdraft program, if one was in place, or under no formal program (over-
draft processed on an ad hoc, discretionary basis). These data included the type of the transaction
(i.e., check, POS/debit, ATM), the date and amount of the transaction, whether the item was paid or
returned unpaid, and the NSF fee charged. To minimize the data-gathering burden for banks, the micro-
data collected 12 consecutive months of NSF transaction data for the period that was most feasible for
banks to provide. All of the transaction data analyzed in this section reflect customer NSF activity for
12 consecutive months that occurred between January 2005 and September 2008. The data collection
instrument used in the micro-data collection effort is attached as Appendix B.
As mentioned in the methodology, this portion of the study involved a nonrandom sample, so it is not
possible to draw statistical inferences from any bank-level analysis using these data. Nevertheless, these
micro-data provide unprecedented and valuable information about consumer usage and fee reliance on
the automated overdraft programs.
IX.1. Overview of Overdraft Programs Operated and Account Coverage of Micro-Data Banks
The 39 micro-data banks reported a total of $332 billion in assets and more than 6.5 million consumer
transaction accounts with a total account balance of $35.6 billion.44 Of the 39 banks, 28 had an auto-
mated overdraft program in place. These banks accounted for 98.2 percent of the consumer accounts
analyzed and 94.4 percent of the deposit balances held in these accounts (see Table IX-1). Among the
28 banks that operated an automated overdraft program, half (14 out of 28) had a nonpromoted auto-
mated program (see Table IX-2). Of the 11 micro-data banks that did not operate an automated over-
draft program, 10 had other formal overdraft programs in place (i.e., linked-account programs, overdraft
LOC programs, or both), and one did not have a formal overdraft program in place. These 11 banks
accounted for 1.8 percent of the consumer accounts analyzed and 5.6 percent of the total deposit dollars.
43
The survey results reported in Sections III to VIII provide information about the types of overdraft programs operated by a
bank, but do not provide evidence about actual number of accounts covered by particular types of programs at a bank.
44
The asset information is based on the December 2006 Call Report data. The number of accounts reported excludes business
accounts, savings accounts (other than checkable accounts), new accounts, and customers with more than ten accounts.
November 2008
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 70
Part Two—Micro-Level Data IX. Micro-Level Data: Consumer Overdraft Usage
Table IX-1
Consumer Transaction Accounts and Deposit Dollars Held in Micro-Data Banks by
Overdraft Program Type Offered
Suma
Percent of Row Total By Program Type
Category All Automated Nonautomated
Number of banks 39 28 11
100.0 71.8 28.2
Number of accounts 6,539,446 6,420,017 119,429
100.0 98.2 1.8
Deposits ($ Millions) 35,578 33,599.6 1,978.5
100.0 94.4 5.6
a
Excludes business accounts, savings accounts, other than checkable accounts, new accounts, and customers with more than 10 accounts.
Table IX-2
Overdraft Protection Programs Offered by Micro-Data Banks
Frequency of Study Population
Percent of Column Total By Asset Size
Memo Item(s):
Did your institution operate $250 Million Greater Greater
this program at any point in Less than to Less than than $1 Billion to than
2006 or 2007? All $250 Million $1 Billion $1 Billion $5 Billion $5 Billion
By Automated Overdraft Program
Automated 28 9 0 19 3 16
71.8 75.0 0.0 79.2 42.9 94.1
Promoted 14 9 0 5 1 4
35.9 75.0 0.0 20.8 14.3 23.5
Nonpromoted only 14 0 0 14 2 12
35.9 0.0 0.0 58.3 28.6 70.6
No automated 11 3 3 5 4 1
28.2 25.0 100.0 20.8 57.1 5.9
Linked and/or LOCs 10 2 3 5 4 1
25.6 16.7 100.0 20.8 57.1 5.9
No formal program only 1 1 0 0 0 0
2.6 8.3 0.0 0.0 0.0 0.0
Total data download banks 39 12 3 24 7 17
100.0 100.0 100.0 100.0 100.0 100.0
Among the consumer accounts in the micro-data, 98.2 percent were held in banks with automated
overdraft program (see Table IX-1). Most accounts (86.3 percent) were covered by a nonpromoted auto-
mated overdraft program (see Table IX-3). This result was driven by the fact that micro-data institutions
with nonpromoted automated programs were very large (most with more than $5 billion in assets) (see
Table IX-2). In contrast, a much smaller proportion of the consumer transaction accounts analyzed had
overdraft coverage under linked-accounts (12.8 percent) or overdraft LOC programs (3.2 percent).
Note that an account could be covered under multiple overdraft programs (see Table IX-3).
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 71
Part Two—Micro-Level Data IX. Micro-Level Data: Consumer Overdraft Usage
Table IX-3
Overdraft Program Coverage for Consumer Transaction Accounts
for All Micro-Data Banks
Suma
Account Coverage Type Percent of Column Total
Linked accounts covered 834,866
12.8
Covered by LOC 209,551
3.2
Covered by promoted automated programs 248,853
3.8
Covered by nonpromoted automated programs 5,644,784
86.3
Total consumer transaction accountsb 6,539,446
a
Excludes business accounts, savings accounts, other than checkable accounts, new accounts, and customers with more than 10 accounts.
b
Some accounts are covered by multiple programs.
IX.2. Characteristics of Automated Overdraft Programs Operated by Micro-Data Banks
The 28 micro-data banks that operated automated overdraft programs reported 6.4 million consumer
accounts with an aggregate average balance of $33.6 billion (see Table IX-1). Of these accounts,
71.3 percent were checking accounts, 19.9 percent were NOW accounts, and 8.8 percent were MMD
accounts (see Table IX-4).
In 26 of the 28 micro-data banks operating automated programs, customers were automatically enrolled
in the program and were required to affirmatively opt out of the program if they did not want this type of
overdraft coverage (see Table IX-5). Most banks that operated automated overdraft programs (89.3
percent) advanced funds to cover all types of transactions (see Table IX-6). Almost all micro-data banks
with automated overdraft covered POS/debit transactions. One bank covered overdrafts originated only
through checks.
Most micro-data banks with automated overdraft programs (67.9 percent) batch processed transactions
by size, starting with the largest transactions (see Table IX-7). Consistent with the survey results, largest-
to-smallest batch processing was more prevalent among large institutions. About 18 percent of the banks
that provided micro-data batch processed items starting with the smallest item, and these were all small
banks.
Table IX-4
Type of Accounts by Neighborhood Income for Micro-Data Banks with
Automated Overdraft Programs
Percentage of Row Total By Account Typea
Census Tract Income Bracket All Checking NOW MMD
Low income 100.0 76.2 18.6 5.2
Moderate income 100.0 76.2 17.2 6.6
Middle income 100.0 72.0 19.8 8.2
Upper income 100.0 66.3 22.2 11.6
Income not classified 100.0 72.1 15.2 12.8
No tract 100.0 79.8 11.8 8.3
All income classes 100.0 71.3 19.9 8.8
a
Excludes business accounts, savings accounts, other than checkable accounts, new accounts, and customers with more than 10 accounts.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 72
Part Two—Micro-Level Data IX. Micro-Level Data: Consumer Overdraft Usage
Table IX-5
Opt-In/Opt-Out Policies of Micro-Data Banks with Automated Overdraft Programs
Number of Banks
Percent of Column Total By Asset Size
Did customers opt­in or opt­out of your $250 Million to
institution’s program, or was the option Less than Less than Greater than
not available? All $250 Million $1 Billion $1 Billion
Opt-out 26 9 0 17
92.9 100.0 NA 89.5
Other 2 0 0 2
7.1 0.0 NA 10.5
Total micro-data banks with automated 28 9 0 19
100.0 100.0 NA 100.0
Note: NA = not applicable.
Table IX-6
Transactions Covered by Micro-Data Banks with Automated Overdraft Programs
Number of Banks
Percent of Column Total By Asset Size
Which transactions were covered by $250 Million to
your institution’s program in the event of Less than Less than Greater than
an overdraft? All $250 Million $1 Billion $1 Billion
All Transaction Combinations
Checks, ATM, POS/debit, and any ACH 25 8 0 17
89.3 88.9 NA 89.5
Checks, POS/debit, and any ACH 1 0 0 1
3.6 0.0 NA 5.3
Checks and any ACH 1 1 0 0
3.6 11.1 NA 0.0
Checks only 1 0 0 1
3.6 0.0 NA 5.3
Total micro-data banks with automated 28 9 0 19
100.0 100.0 NA 100.0
Note: NA = not applicable.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 73
Part Two—Micro-Level Data IX. Micro-Level Data: Consumer Overdraft Usage
Tabe IX-7
Transaction Batch-Processing Method for Micro-Data Banks with
Automated Overdraft Programs
Number of Banks
Percent of Column Total By Asset Size
For those items that are batch
processed, which method best describes $250 Million to
the order in which transactions were Less than Less than Greater than
typically paid by your institution? All $250 Million $1 Billion $1 Billion
By order of presentation 2 1 0 1
7.1 11.1 NA 5.3
By size, largest-to-smallest 19 3 0 16
67.9 33.3 NA 84.2
By size, smallest-to-largest 5 5 0 0
17.9 55.6 NA 0.0
Other 2 0 0 2
7.1 0.0 NA 10.5
Total micro-data banks with automated 28 9 0 19
100.0 100.0 NA 100.0
Note: NA = not applicable.
IX.2.A. Distribution of Consumer Transaction Accounts by Income Group
The micro-data request collected nine-digit ZIP code data of consumer account holders. ZIP code infor-
mation was also used to identify the census tract and income bracket associated with an account holder.
Income brackets were determined by comparing the family median income of a census tract to the family
median income for the metropolitan statistical area (MSA) where the census tract was located.45 Low-
income tracts were those where the median income was less than 50 percent of MSA median income;
moderate-income tracts had median income between 50 percent and 80 percent of the MSA median
income; middle-income tracts had median income between 80 percent and 120 percent of the MSA
median income; and upper-income tracts had median income that exceeded 120 percent of the MSA
median.46 Table IX-8 shows the dollar range for each income level, calculated using the lowest and the
highest MSA family median income in 2006. For example, the lowest median income in the country
Table IX-8
Median Family Income Thresholds by Census Tract Income Bracket
Dollar Amounts 2006 HUD MSA Estimates
Lowest Highest
(McCallen-Edinburg- (Bethesda-Gaithersburg-
2006 USAa Mission MSA, TX) Frederick MSA, MD)
Family median income $58,526 $30,800 $98,400
By census tract income (upper bound except where indicated):
Low $29,263 $15,400 $49,200
Moderate $46,821 $24,640 $78,720
Middle $70,231 $36,960 $118,080
Upper (lower bound) $70,231+ $36,960+ $118,080+
a
2006 USA estimates based on 2006 American Community Survey.
45
For census tracts in rural areas, family median income was compared to family median income of all rural tracts in the state.
46
This classification follows the standards used for the purposes of the Community Reinvestment Act.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 74
Part Two—Micro-Level Data IX. Micro-Level Data: Consumer Overdraft Usage
Table IX-9
Customer Accounts by Income Group for Micro-Data Banks with
Automated Overdraft Programs
Census Tract Income Bracket Percent of Column Total
Low income 2.3
Moderate income 14.2
Middle income 54.2
Upper income 27.3
Income not classified 0.0
No tract 2.0
All income classes 100.0
a
Excludes business accounts, savings accounts, other than checkable accounts, new accounts, and customers with more than 10 accounts.
Table IX-10
Account Balance by Average Dollar Amount Held and Income Group for Micro-Data Banks with
Automated Overdraft Programs
Percent of Row Total By Account Balancea
Less than Less than Less than Less than Less than 3,000
Census Tract Income Bracket All 100 500 1,000 2,000 3,000 or More Unknownb
Low income 100.0 56.7 14.6 8.5 7.3 3.0 9.9 0.0
Moderate income 100.0 39.1 16.2 11.2 10.8 5.1 17.7 0.0
Middle income 100.0 30.3 15.5 11.8 12.8 6.4 23.1 0.0
Upper income 100.0 33.5 14.4 9.1 10.7 6.2 26.1 0.0
Income not classified 100.0 32.2 14.8 10.0 7.7 5.1 30.2 0.1
No tract 100.0 26.2 16.1 12.3 13.0 6.6 25.9 0.0
All income classes 100.0 32.9 15.3 10.9 11.8 6.1 22.9 0.0
a
Excludes business accounts, savings accounts, other than checkable accounts, new accounts, and customers with more than 10 accounts.
b
Includes customers with missing data on account balance.
(McCallen-Edinburg-Mission, Texas) was $30,800. Therefore, moderate-income families in this area
earned an annual income between $15,400 and $24,640.
For micro-data banks with automated overdraft programs, 81.5 percent of the 6.4 million consumer
accounts were held by customers located in middle- and upper-income neighborhoods (see Table IX-9).
Accounts held by consumers located in low- and moderate-income areas made up 16.5 percent of
consumer accounts in the micro-data (2.3 percent in low-income and 14.2 percent in moderate-income
areas). As a reference, low- and moderate-income areas account for 25.0 percent of the country’s popu-
lation (4.0 percent in low-income and 21.0 percent in moderate-income areas), 50.0 percent of the
country’s population reside in middle-income areas, and 24.0 percent reside in upper-income areas.47
Approximately 2 percent of the consumer accounts analyzed could not be classified in terms of neighbor-
hood income because of incomplete or erroneous ZIP codes.48
The type and average balance of accounts held at micro-data banks with automated overdraft programs
differed by income area. More than three-fourths of accounts in low- and moderate-income areas were
checking accounts, and less than 6 percent were MMDs. In contrast, micro-data accounts in upper-
47
According to the 2000 U.S. Census Bureau data from the Federal Financial Institutions Examination Council (FFIEC) 2006
census data file.
48
A nine-digit ZIP code was used to assign the census tract for 5.6 million accounts (86 percent). For 763,000 accounts (12
percent), a five-digit ZIP code was used to approximate the census tract. Approximately 127,000 consumer accounts in the micro-
data did not have a valid ZIP code.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 75
Part Two—Micro-Level Data IX. Micro-Level Data: Consumer Overdraft Usage
income areas had the highest proportion of NOW and MMD accounts (22.2 percent and 11.6 percent,
respectively), and two-thirds of accounts were checking accounts (see Table IX-4).
Regarding account balance, more than half (56.7 percent) of the micro-data accounts in low-income
areas held less than $100, on average, during the period of analysis (see Table IX-10). In comparison,
39.1 percent of micro-data accounts in moderate-income areas had less than $100 on average. Middle-
and upper-income areas had approximately one-third of accounts with less than $100 and about one
quarter of accounts with an average balance of $3,000 or more.
IX.3. Patterns of NSF Activity and Fees for Micro-Data Banks with Automated Overdraft Programs
As noted earlier, the micro-data request collected 12 months of NSF transaction activity processed
under automated overdraft programs. For institutions with no automated overdraft programs (including
banks that operated only linked-accounts or overdraft LOC programs or both), the NSF transaction data
included only NSF items processed on an ad hoc basis and usually through a manual review process. The
micro-data did not collect NSF transactions processed under linked-account or overdraft LOC programs.
Micro-data banks reported 22.6 million NSF transactions incurred by consumer accounts during the
12-month period of analysis.49 Almost all (22.5 million) of the NSF transactions analyzed were reported
by the 28 micro-data banks that operated automated overdraft programs.
For the 28 micro-data banks with an automated program, 74.3 percent of consumer accounts had no
NSF transactions during the 12-month period examined (see Table IX-11). However, 11.9 percent of
accounts had 1 to 4 transactions, 5.0 percent had 5 to 9 transactions, 4.0 percent had 10 to 19 transac-
tions, and 4.9 percent of accounts incurred 20 or more NSF transactions. Accounts with at least 10 NSF
transactions were charged 84.0 percent of all NSF fees, and the 4.9 percent with 20 or more NSF trans-
actions were charged more than 68 percent of all NSF fees (see Table IX-12).
Micro-data banks with automated overdraft programs charged consumer transaction accounts a total of
$738 million in NSF fees over the 12-month period of the study. Consumer accounts with one to four
transactions were charged an average $64 per year in NSF fees (see Table IX-13). For accounts with 20
or more transactions, the average annual cost was $1,610.
For the 11 micro-data banks with no automated program, 81.6 percent of consumer accounts had no
NSF transactions during the year, 12.7 percent had 1 to 4 transactions, and 1.4 percent had more than
Table IX-11
Customer Accounts by Number of NSF Transactions per Year and Income Group
for Micro-Data Banks with Automated Overdraft Programs
Percentage of Row Total By Number of Transactionsa
Census Tract Income Bracket All Zero 1 to 4 5 to 9 10 to 19 20 or More
Low income 100.0 61.9 16.7 7.6 6.3 7.5
Moderate income 100.0 68.4 13.9 6.2 5.1 6.4
Middle income 100.0 74.3 11.8 5.0 4.0 4.9
Upper income 100.0 78.2 10.5 4.2 3.3 3.8
Income not classified 100.0 74.6 12.2 6.0 3.6 3.6
No tract 100.0 74.2 12.6 5.1 3.9 4.3
All income classes 100.0 74.3 11.9 5.0 4.0 4.9
a
Excludes business accounts, savings accounts, other than checkable accounts, new accounts, and customers with more than 10 accounts.
49
For all 39 micro-data banks, 91.2 percent of the 22.6 million NSF transactions were paid, 8.3 percent were not paid, and
payment information was missing for 0.5 percent.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 76
Part Two—Micro-Level Data IX. Micro-Level Data: Consumer Overdraft Usage
Table IX-12
NSF Fees Charged by Income Group and by Number of NSF Transactions per Year
for Micro-Data Banks with Automated Overdraft Programs
Percent of Row Total By Number of Transactionsa
Census Tract Income Bracket All 1 to 4 5 to 9 10 to 19 20 or More
Low income 100.0 6.2 9.6 16.9 67.2
Moderate income 100.0 6.1 9.1 15.9 68.9
Middle income 100.0 6.6 9.2 15.4 68.8
Upper income 100.0 7.2 9.8 15.9 67.1
Income not classified 100.0 8.3 14.0 18.5 59.1
No tract 100.0 7.9 10.9 17.2 64.1
All income classes 100.0 6.6 9.4 15.7 68.3
a
Excludes business accounts, savings accounts, other than checkable accounts, new accounts, and customers with more than 10 accounts.
Table IX-13
Annual Dollar Amount of NSF Fees Charged per Consumer Account for
Micro-Data Banks with Automated Overdraft Programs
Average Dollar Amount By Number of Transactionsa
Census Tract Income Bracket All 1 to 4 5 to 9 10 to 19 20 or More
Low income 174 64 221 464 1,568
Moderate income 148 65 218 457 1,597
Middle income 116 65 215 449 1,618
Upper income 92 63 213 446 1,613
Income not classified 89 61 207 458 1,460
No tract 103 65 220 459 1,536
All income classes 115 64 215 451 1,610
a
Excludes business accounts, savings accounts, other than checkable accounts, new accounts, and customers with more than 10 accounts.
Table IX-14
Customer Accounts and NSF Fees by Number of NSF Transactions per Year
for Banks with No Automated Overdraft Program
Percentage of Row Total By Number of Transactionsa
Category All NSF Classes Zero 1 to 4 5 to 9 10 to 19 20 or More
Accounts 100.0 81.6 12.7 2.9 1.5 1.4
NSF fees 100.0 0.0 14.6 11.6 12.3 61.5
a
Excludes business accounts, savings accounts, other than checkable accounts, new accounts, and customers with more than 10 accounts.
20 transactions (see Table IX-14). As with the other banks, the majority of fees (61.5 percent) were
charged to accounts with more than 20 transactions.
IX.3.A. NSF Activity by Income Group for Micro-Data Banks
For micro-data banks with automated overdraft programs, lower-income groups were more likely to
incur NSF charges than higher-income groups. About 62 percent of accounts in low-income areas had
zero NSF charges, while 78.2 percent of accounts in upper-income areas had zero NSF charges (see
Table IX-11). Recurrent overdrafts were also more likely in lower income groups. Among low-income
customers, 16.7 percent of accounts had 1 to 4 NSF transactions, and 7.5 percent had 20 or more trans-
actions. By comparison, moderate-income customers had 13.9 percent of accounts with 1 to 4 NSF
transactions and 6.4 percent of accounts with 20 or more NSF transactions. Customers in upper-income
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 77
Part Two—Micro-Level Data IX. Micro-Level Data: Consumer Overdraft Usage
Table IX-15
NSF Transactions by Income Group and Transaction Type
for Micro-Data Banks with Automated Overdraft Programs
Percent of Row Total By Transaction Typea
Census Tract Income
Bracket All Check ATM POS/Debit ACH Otherb Unknownc
Low income 100.0 21.2 16.4 40.6 15.2 5.8 0.8
Moderate income 100.0 26.7 10.7 40.1 15.0 5.1 2.4
Middle income 100.0 31.4 7.0 40.2 14.0 4.0 3.4
Upper income 100.0 30.8 6.1 44.2 13.8 2.9 2.3
Income not classified 100.0 37.1 4.7 42.2 14.5 1.0 0.5
No tract 100.0 36.3 7.9 37.4 14.2 3.4 0.7
All income classes 100.0 30.2 7.8 41.0 14.2 4.0 2.8
a
Excludes business accounts, savings accounts, other than checkable accounts, new accounts, and customers with more than 10 accounts.
b
Includes all transactions designated as “other.”
c
Includes all transactions with missing data on transaction type.
Table IX-16
NSF Transactions by Income Group and Transaction Type
for Micro-Data Banks with Nonautomated Overdraft Programs
Percent of Row Total By Transaction Typea
Census Tract Income
Bracket All Check ATM POS/Debit ACH Otherb Unknownc
Low income 100.0 73.9 0.0 0.0 14.2 11.8 0.0
Moderate income 100.0 65.0 0.0 0.1 24.9 10.1 0.0
Middle income 100.0 63.4 0.1 0.3 25.0 11.2 0.0
Upper income 100.0 69.3 0.1 0.0 13.9 16.7 0.0
Income not classified 100.0 79.2 0.0 0.0 3.8 17.0 0.0
No tract 100.0 74.6 0.0 0.0 24.8 0.6 0.0
All income classes 100.0 67.5 0.1 0.1 19.2 13.2 0.0
a
Excludes business accounts, savings accounts, other than checkable accounts, new accounts, and customers with more than 10 accounts.
b
Includes all transactions designated as “other.”
c
Includes all transactions with missing data on transaction type.
areas had 10.5 percent of accounts with 1 to 4 transactions and just 3.8 percent of accounts with 20 or
more NSF transactions.
The micro-data request asked the banks to identify the type of NSF transaction: paper checks or
equivalents, ATM withdrawals, POS/debit, or ACH transactions. The largest share of NSF transactions
(41.0 percent) reported by micro-data banks with automated programs was generated at POS/debit
terminals, while ATM transactions accounted for 7.8 percent of all NSF transactions analyzed (see
Table IX-15). These two types of electronic payments accounted for nearly half of all NSF transactions.
Checks remained a significant source of NSF transactions (30.2 percent). NSF transactions via ACH
accounted for 14.2 percent of reported overdraft items. In contrast, the NSF transactions processed
for the 11 micro-data banks with no automated overdraft program exhibited very different results. For
these banks, the NSF approval or denial occurred on a case-by-case basis (as opposed to an automated
process), and real-time transactions such as NSF originating at ATM or POS/debit terminals were
generally rejected.50 Accordingly, less than 1 percent of the NSF transactions processed under no formal
50
If the ATM or POS/debit terminal was offline, real-time funds verification was not possible and transactions could be
approved, causing an inadvertent NSF.
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 78
Part Two—Micro-Level Data IX. Micro-Level Data: Consumer Overdraft Usage
Table IX-17
Median NSF Transaction Amount by Income Group and Type of Transaction
for Micro-Data Banks with Automated Overdraft Programs
Median Dollar Amount By Type of Transactiona
Census Tract Income
Bracket All Check ATM POS/Debit ACH Otherb Unknownc
Low income 39 81 60 19 68 25 178
Moderate income 37 70 60 19 72 29 72
Middle income 35 62 60 20 76 20 55
Upper income 37 75 60 20 94 23 87
Income not classified 45 128 60 20 108 41 NA
No tract 37 55 60 20 66 99 101
All income classes 36 66 60 20 78 22 60
a
Excludes business accounts, savings accounts, other than checkable accounts, new accounts, and customers with more than 10 accounts.
b
Includes all transactions designated as “other.”
c
Includes all transactions with missing data on transaction type.
Note: NA = not applicable.
program originated at an ATM or POS/debit transaction (see Table IX-16). For these micro-data banks,
most NSF transactions (67.5 percent) were check transactions.
The median dollar amount of all 22.5 million transactions processed by micro-data banks with auto-
mated programs was $36 (see Table IX-17). POS/debit NSF transactions were not only the most
frequent, but also the smallest, with a median value of $20. The median transaction size of an ATM
withdrawal and a check that resulted in an NSF transaction were $60 and $66, respectively. ACH NSF
transactions showed the largest median at $78.
The following calculations illustrate the relative cost of NSF fees associated with automated overdraft
programs. A customer repaying a $20 POS/debit overdraft in two weeks would incur an APR of 3,520
percent, a customer repaying a $60 ATM overdraft in two weeks would incur an APR of 1,173 percent,
and a customer repaying a $66 check overdraft in two weeks would incur an APR of 1,067 percent.51
More rapid repayment of the overdraft amount would result in higher APRs, and slower repayment
would result in lower APRs.
IX.3.B. NSF Activity by Age Group for Micro-Data Banks
The micro-data request collected year-of-birth information for 94.1 percent of the 6.5 million consumer
accounts held in banks with automated overdraft programs. Adults (ages 26 to 61) held approximately
half (54.9 percent) of consumer accounts analyzed, while seniors (age 62 or older) and young adults
(ages 18 to 25) accounted for 31.3 percent and 7.6 percent, respectively, of consumer accounts analyzed
in the micro-data (see Table IX-18).
Young adults had the largest share of accounts with NSF activity during the year, while seniors had the
smallest share. Only 53.6 percent of young adults had no NSF transactions, while 68.1 percent of adults
and 87.8 percent of seniors had no NSF activity (see Table IX-19). Nearly 15 percent of accounts held
by young adults recorded more than ten NSF transactions during the year, compared with 12.1 percent
of adult accounts and 3.0 percent of senior accounts.
51
These examples assume a $27 overdraft fee (the bank survey median reported in Section IV), the credit extended as
a result of the overdraft occurrence equaled the total transaction, the consumer repaid the credit extended in two
weeks, and no additional fees are imposed on the consumer as a result of the NSF. The APR is calculated as
follows: ((Fee Charged/Amount Financed)*365)/Term (14 days).
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 79
Part Two—Micro-Level Data IX. Micro-Level Data: Consumer Overdraft Usage
Table IX-18
Customer Accounts by Age Group for Micro-Data Banks with
Automated Overdraft Programs
Age Group Percent of Column Totala
Over 62 31.3
26-61 54.9
18-25 7.6
Less than 18 0.4
Unknown 5.9
All age groups 100.0
a
Excludes business accounts, savings accounts, other than checkable accounts, new accounts, and customers with more than 10 accounts.
Table IX-19
Customer Accounts by Number of NSF Transactions in a Year per Age Group
for Micro-Data Banks with Automated Overdraft Programs
Percentage of Row Total By Number of Transactionsa
Age Group All Zero 1 to 4 5 to 9 10 to 19 20 or More
Over 62 100.0 87.8 7.0 2.2 1.5 1.5
26-61 100.0 68.1 13.7 6.1 5.2 6.9
18-25 100.0 53.6 21.5 10.3 7.9 6.8
Less than 18 100.0 78.1 12.1 4.0 3.0 2.7
Unknown 100.0 86.2 7.5 2.4 1.8 2.1
All age classes 100.0 74.3 11.9 5.0 4.0 4.9
a
Excludes business accounts, savings accounts, other than checkable accounts, new accounts, and customers with more than 10 accounts.
Table IX-20
NSF Transactions by Age Group and Transaction Type
for Micro-Data Banks with Automated Overdraft Programs
Percent of Row Total By Transaction Typea
Age Group All Check ATM POS/Debit ACH Otherb Unknownc
Over 62 100.0 46.0 8.1 23.2 16.7 3.5 2.7
26-61 100.0 29.8 7.8 41.1 14.5 4.0 2.8
18-25 100.0 14.4 8.0 61.7 8.7 4.0 3.2
Less than 18 100.0 27.2 10.1 42.4 13.0 4.1 3.3
Unknown 100.0 43.5 5.0 24.4 18.3 5.4 3.3
All income classes 100.0 30.2 7.8 41.0 14.2 4.0 2.8
a
Excludes business accounts, savings accounts, other than checkable accounts, new accounts, and customers with more than 10 accounts.
b
Includes all transactions designated as “other.”
c
Includes all transactions with missing data on transaction type.
The type of NSF transactions also differed across age groups. Among young adults, 61.7 percent of NSF
transactions originated at a POS/debit terminal, while less than 15 percent of NSF transactions were
generated from checks (see Table IX-20). In contrast, for seniors the largest share of NSF transactions
(46.0 percent) originated from checks, while less than one in four NSF transactions (23.2 percent)
originated at POS/debit terminals. The median amount of the NSF transactions for checks was $60 for
both groups, but the POS/debit median transaction resulting in an NSF was $24 for seniors and only $12
for young adults (see Table IX-21).
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 80
Part Two—Micro-Level Data IX. Micro-Level Data: Consumer Overdraft Usage
Table IX-21
Median NSF Transaction Amount by Age Group and Type of Transaction
for Micro-Data Banks with Automated Overdraft Programs
Median Dollar Amount By Transaction Typea
Age Group All Check ATM POS/Debit ACH Otherb Unknownc
Over 62 49 60 60 24 66 19 57
26-61 38 68 60 20 82 25 75
18-25 20 60 40 12 60 14 60
Less than 18 30 54 60 16 67 14 55
Unknown 50 77 60 23 86 30 35
All income classes 36 66 60 20 78 22 60
a
Excludes business accounts, savings accounts, other than checkable accounts, new accounts, and customers with more than 10 accounts.
b
Includes all transactions designated as “other.”
c
Includes all transactions with missing data on transaction type.
IX.4. Summary
This section reported patterns in actual overdraft coverage and overdraft activity for 39 banks that
provided micro-level data on consumer accounts and NSF transactions that were processed under an
automated program or processed on an ad hoc basis under no formal program. Of the 39 micro-data
banks, 28 had an automated overdraft program in place, and most of these were nonpromoted.
Roughly 75 percent of consumer accounts held in micro-data banks with automated overdraft programs
had no NSF item in the 12 months of reported data on NSF activity. However, NSF activity reported in
the micro-data was concentrated in a subset of accounts that reported recurring overdrafts during the
period of analysis. Almost 9 percent of accounts had at least 10 NSF transactions, and 4.9 percent of
accounts incurred 20 or more NSF transactions. A large share (84.0 percent) of total NSF fees were
charged to these accounts, with more than 68 percent of NSF fees charged to accounts with 20 or more
transactions. For consumer accounts with 20 or more transactions, the average annual cost of NSF fees
was $1,610.
The micro-data also showed differences in overdraft activity and fees charged by income group.
Accounts in lower-income areas were more likely to incur overdrafts than accounts in higher-income
areas. More than 38 percent of low-income accounts had at least one NSF transaction, compared with
22 percent of upper-income accounts. Lower-income customers were also more likely to have repeated
overdraft transactions. Almost 14 percent of low-income customers had 10 or more NSF transactions,
and 7.5 percent had more than 20 NSF transactions. Moderate-income customers had 11.5 percent of
accounts with ten or more transactions. Customers in upper-income areas had just 7.1 percent of
accounts with 10 or more NSF transactions, and less than 4 percent with 20 or more NSF transactions.
POS/debit and ATM transactions accounted for almost half the NSF transactions at micro-data banks
with automated overdraft programs. Checks accounted for 30.2 percent of overdraft transactions at
banks with automated programs. The median dollar value of transactions at banks with automated
programs was $20 for POS/debit, $60 for ATM, and $66 for checks. Assuming a $27 overdraft fee (the
survey median), a customer repaying a $20 POS/debit overdraft in two weeks would incur an APR of
3,520 percent; a customer repaying a $60 ATM overdraft in two weeks would incur an APR of 1,173
percent; and a customer repaying a $66 check overdraft in two weeks would incur an APR of 1,067
percent. More rapid repayment of the overdraft amount results in higher APRs and slower repayment
results in lower APRs.52
52
These examples assume that the credit extended as a result of the overdraft occurrence equaled the total transaction, that
the consumer repaid the credit extended in two weeks, and that no additional fees were imposed on the consumer as a result of
the NSF. The APRs were calculated as follows: ((Fee Charged/Amount Financed)*365)/Term (14 days).
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 81
Part Two—Micro-Level Data IX. Micro-Level Data: Consumer Overdraft Usage
During the period of analysis, young adults were more likely, and seniors less likely, to have NSF activity.
Among young adults, 46.4 percent of accounts incurred NSF activity, compared with 31.9 percent of
accounts held by adults and 12.2 percent of accounts held by seniors. Based on the type of NSF transac-
tions, the micro-data suggest greater reliance on electronic payments among young adults, with most
NSF transactions originating at a POS/debit terminal and less than 15 percent resulting from checks. In
the case of seniors, the largest share of NSF transactions (46.0 percent) originated from checks, while
fewer than one in four NSF transactions (23.2 percent) originated at POS/debit terminals. The median
check NSF amount was the same for seniors and young adults ($60), but POS/debit transactions result-
ing in an NSF tended to be smaller for young adults ($12, compared with $24 for seniors and $20 for
other adults).
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 82
FDIC Study Group on Bank Overdraft Programs
Principle Authors, Analysts, and Survey and Data Collection Overseers:
Division of Supervision and Consumer Protection:
Patricia Cashman
Robert Cordeiro
Victoria Pawelski
Division of Insurance and Research:
Susan Burhouse
Timothy Critchfield
Yan Lee
Katherine Samolyk
Many others on the staff of the FDIC worked on various aspects of the study, including: Anne Beavers,
David Chapman, Dennis Clague, Ross Dierdorff, Joe Fellerman, Peggi Gill, Ryan Goodstein, Jocelyn
Grazal, Don Inscoe, David Lee, Allison Mulcahy, Emily Song, Brent Webster, and Kathy Zeidler from
the Division of Insurance and Research; Sharon Adkisson, April Breslaw, Matthew Duke, Pat Farrell,
Jennifer Graham, Kevin Green, Mary Ann Hartman, Mike Lapinsky, Carol Liquori, Marilyn Medina,
Corrine Moore, Nydia Moore, Amy Neal, Craig Nulliner, John Penkala, Juanita Pinkston, Deborah
Stephenson, Jim Tylicki, Matt Valentine, and Jana Aylett Wong from the Division of Supervision and
Consumer Protection; Leneta Gregorie and Steve Hanft from the Legal Division; and Yazmin Osaki and
Barbara Ryan from the Office of the Vice Chairman.
November 2008
FDIC StuDy oF baNk overDraFt ProgramS n November 2008 83
Appendix A
FDIC Overdraft Survey Instrument
Institution Programs and Practices
Final Version: June 26, 2008
Table of Contents
Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
Survey I Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
I. GENERAL & AGGREGATE
A. Scope of Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Aggregate Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
C. General Processing Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
D. Program Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
II. PROGRAM SPECIFIC
A. Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
B. Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
C. Information Provided to Consumers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
D. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
E. Account Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
F. Vendors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Public Burden Statement
It is estimated that completing this form, including reviewing the instructions and gathering the data needed,
takes an average of 3 hours. Send comments regarding this burden estimate or any other aspect of this collec-
tion of information, including suggestions for reducing this burden to the Paper Reduction Act Clearance Officer,
Legal Division, Federal Deposit Insurance Corporation, 550 17th Street, N.W., Washington, D.C. 20429. An agency
may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it
displays a currently valid OMB control number. This form is OMB control number 3064-0155.
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-1
Appendix A FDIC Overdraft Survey Instrument
Definitions
A. Programs
(1) Linked Transfer Accounts
A contractual agreement between a bank and a customer, linking the customer’s transactions account with
other accounts within the bank, including savings and credit card accounts. In the event of an overdraft, the
bank will fulfill the customer’s obligations by transferring funds from the customer’s other accounts linked to his
transactions account.
(2) Overdraft Lines of Credit
A contractual agreement between a bank and a customer that the bank is willing to lend up to a specified
amount over a specified future period to cover overdrafted items. These programs DO NOT include line of credit
programs that do not specifically cover overdrafted items, for example, home equity lines of credit. The bank
extends the line of credit after reviewing a customer using standard underwriting criteria; the line is considered
a loan and requires standard Truth-in-Lending (Regulation Z) disclosures.
(3) Automated Promoted Overdraft Protection
A program or policy where a bank generally honors a customer’s overdrafted obligations, and customers ARE
informed of the existence of the overdraft protection program. The program is uniformly offered to qualifying
customers. Excluded are all overdraft programs where an APR is required. The program is automated in the
sense that standardized procedures or a “matrix” is used to determine whether the NSF item qualifies for the
overdraft protection. Automated programs are typically, but not necessarily, computerized.
(4) Automated Non-Promoted Overdraft Protection
A program or policy where a bank generally honors a customer’s overdrafted obligations; however, customers
are NOT informed of the existence of the overdraft protection program. The program is automated in the sense
that standardized procedures or a “matrix” is used to determine whether the NSF item qualifies for the overdraft
protection. Automated programs are typically, but not necessarily, computerized.
(5) Non-Automated Non-Promoted Ad Hoc Overdraft Protection
These include truly incidental and discretionary accommodations to customers by banks to honor overdrafted
items. These decisions are made independent of or override the programs described in (1) through (4).
B. Terms
Grace Period – The period of time an account holder has to bring an overdrafted account back to a positive
balance without incurring any fees other than the initial per item/per occurrence fee.
Initiation Fee vs. Maintenance Fee – An initiation fee is a one time charge to begin/establish a customer in a
program. A maintenance fee is a recurring fee to maintain the customer in the program. It is typically a monthly
or annual fee.
Overdraft Item vs. Occurrence – For example, if a customer had two bounced checks in a given day and was
charged two separate fees, that would be considered a fee “per item.” On the other hand, if the customer was
charged one lump sum to cover both checks in the same day, that would be considered a fee “per occurrence.”
Workout Phase – When a customer cannot return an account to a positive status and works with the bank to
develop a repayment schedule.
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-2
Appendix A FDIC Overdraft Survey Instrument
Survey I
A. Institution
Bank Name
Headquarter City
Headquarter State
Region
FDIC Certificate Number
B. FDIC
Examiner Name
Examination Type
Examination Date
Survey I Completion Date
C. Coverage
As of July 1, 2006, did the institution believe it
was subject to the overdraft provisions of
Regulation DD
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-3
Appendix A FDIC Overdraft Survey Instrument
I. General
A. Scope of Services
Section IA determines to what extent portions of this survey are relevant to the institution depending on what overdraft options it
offers or offered in 2006-2007. For questions IA1, IA2, IA3, and IA4, each “Yes” answer indicates that a subsequent subsection in
Section II, “Program Specifics,” related respectively, to (1) linked transfer accounts, (2) overdraft lines of credit, (3) automated
promoted overdraft protection, and (4) automated non-promoted overdraft protection, is to be completed. Please refer to page ii for
definitions for Programs (1) through (4).
1. Does the institution offer linked transfer accounts, or offered it at any point in 2006 or 2007? If yes, please answer
the questions using column (1) for all subsections of Section II. 1 = Yes, 2 = No.
1.1 If the institution initiated the program within the last five years, please specify the month and year in which the
institution initiated the program. Please mark “NA” if not applicable.
a. Month (MM) b. Year (YYYY)
1.2 If the institution terminated the program in 2006 or 2007, please specify the month and year in which the institution
terminated the program. Please mark “NA” if not applicable.
a. Month (MM) b. Year (YYYY)
1.3 If yes to Question 1, please describe below the institution’s program.
2. Does the institution offer overdraft lines of credit, or offered it at any point in 2006 or 2007? If yes, please answer
the questions using column (2) for all subsections of Section II. 1 = Yes, 2 = No.
2.1 If the institution initiated the program within the last five years, please specify the month and year in which the
institution initiated the program. Please mark “NA” if not applicable.
a. Month (MM) b. Year (YYYY)
2.2 If the institution terminated the program in 2006 or 2007, please specify the month and year in which the institution
terminated the program. Please mark “NA” if not applicable.
a. Month (MM) b. Year (YYYY)
2.3 If yes to Question 2, please describe below the institution’s program.
3. Does the institution offer automated promoted overdraft protection, or offered it at any point in 2006 of 2007? If yes,
please answer the questions using column (3) for all subsections of Section II. 1 = Yes, 2 = No.
3.1 If the institution initiated the program within the last five years, please specify the month and year in which the
institution initiated the program. Please mark “NA” if not applicable.
a. Month (MM) b. Year (YYYY)
3.2 If the institution terminated the program in 2006 or 2007, please specify the month and year in which the institution
terminated the program. Please mark “NA” if not applicable.
a. Month (MM) b. Year (YYYY)
3.3 If yes to Question 3, please describe below the institution’s program.
4. Does the institution extend automated non-promoted overdraft protection, or did so at any point in 2006 or 2007? If
yes, please answer the questions using column (4) for all subsections of Section II. 1 = Yes, 2 = No.
4.1 If the institution initiated the program within the last five years, please specify the month and year in which the
institution initiated the program. Please mark “NA” if not applicable.
a. Month (MM) b. Year (YYYY)
4.2 If the institution terminated the program in 2006 or 2007, please specify the month and year in which the institution
terminated the program. Please mark “NA” if not applicable.
a. Month (MM) b. Year (YYYY)
4.3 If yes to Question 4, please describe below the institution’s program.
5. Does the institution have any other overdraft program that does not meet the descriptions of programs (1) through
(4) described under “Definitions - A. Programs”? 1 = Yes, 2 = No.
5.1 If yes, please describe below this program.
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-4
Appendix A FDIC Overdraft Survey Instrument
I. General
B. Aggregate Income & Losses
1. For each year below, what was the TOTAL dollar amount of the institution’s total gross income from all fees related to NSF items?
This includes fee income for paid overdrafted items, for returned overdrafted items, from initiation fees, and from maintenance fees.
1.1 2006
1.2 2005
1.3 2004*
1.4 2003*
1.5 2002*
2.* For each year below, what was the dollar amount of the institution’s total gross income from per item/ per occurrence PAID NSF
items? This excludes fee income for returned overdrafted items, initiation fees, and maintenance fees.
2.1 2006
2.2 2005
2.3 2004
2.4 2003
2.5 2002
3.* For each year below, what was the dollar amount of the institution’s total gross income from per item/ per occurrence
RETURNED NSF items? This excludes fee income for paid overdrafted items, initiation fees, and maintenance fees.
3.1 2006
3.2 2005
3.3 2004
3.4 2003
3.5 2002
4. How many deposit
accounts were charged
off in 2006?
5. What was the total
dollar amount of these
charge-offs?
6. How many deposit
accounts were
converted to workout
loans in 2006?
7. What was the total
dollar amount of these
workout loans?
*Note: If data readily available.
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-5
Appendix A FDIC Overdraft Survey Instrument
I. General
C. General Processing Practices
1. In what order are transactions typically paid? (Please rank beginning from “1” and mark “NA” if not
applicable.)
a. Cash transactions (e.g. teller services)
b. In-house ATM transactions
c. System ATM transactions
d. On us
e. Online payments
f. ACH
g. POS
h. Other (please describe below)
2. For those items which the institution batch processes, which method best describes in what order
transactions are typically paid?
1 = By size, starting with largest
2 = By size, starting with the smallest
3 = By check number
4 = By order of presentation
5 = Other (please describe below)
3. Can an account be covered by more than one overdraft program? 1 = Yes, 2 = No.
3.1 Please rank, beginning from “1” or (mark “NA” if not offered), the order in which a customer’s
applicable overdraft protection programs are invoked.
a. Linked Transfer Accounts
b. Overdraft Lines of Credit
c. Promoted Overdraft Protection
d. Automated Non-Promoted Overdraft Protection
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-6
Appendix A FDIC Overdraft Survey Instrument
I. General
D. Program Selection
1. How does the institution determine which overdraft protection program to offer new customers?
1 = Offers all programs available for the type of account
2 = Uses software to determine which customers are offered which programs
3 = Offers only automated promoted overdraft protection unless other options solicited by customer
4 = Other (please describe below)
2. Does the institution provide information that allows consumers to compare the features and costs of
alternative types of overdraft protection? 1 = Yes, 2 = No
2.1 If yes, with what means are customers informed of alternative types of overdraft protection offered
by the institution? (Mark each that applies.)
a. Deposit account agreement
b. Brochure about accounts
c. Bank personnel informs customers
d. Provide information only when asked
e. Other (please describe below)
3. Does the institution offer any educational information that helps customer use overdraft protection
wisely/efficiently? 1 = Yes, 2 = No
3.1 If yes, with what means are customers assisted in selecting an overdraft protection
program? (Mark each that applies.)
a. Comparison chart
b. Fee sheets
c. Example of costs
d. Overdraft protection brochure
e. Other (please describe below)
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-7
Appendix A FDIC Overdraft Survey Instrument
II. Program Details
(1) (2) (3) (4) (5)
Non-
Automated
Automated Non-
Automated Non- Promoted
Linked Promoted Promoted Ad Hoc
Transfer Lines of Overdraft Overdraft Overdraft
Accounts Credit Protection Protection Protection
Complete this section if you answered “Yes” for Question:
A. Policies IA1 IA2 IA3 IA4 IA5
1. Has the institution adopted written policies and procedures
to address the operational and other risks associated with the
program?
1 = Yes, 2 = No
1.1 If yes, does this policy set a cap on the total dollar amount
of advances per customer that the bank will extend through
the program, which is consistent with the institution’s ability to
absorb losses?
1 = Yes, 2 = No
1.1.1 If yes, what is that dollar limit?
1.2 What other features of the program are established in this
written policy? (Mark each that applies.)
a. All associated fees
b. APR
c. The process for providing disclosures to customers
d. A timeline of customer notification
e. The period established to repay/bring account positive
f. A timeline for charge-off of unpaid advances
g. Workout loan procedures
h. Other (please describe below)
2. Was this program reviewed for compliance with applicable
laws prior to implementation? (Mark each that applies.)
a. Yes, by bank counsel
b. Yes, by independent counsel
c. Yes, by bank management
d. Yes, by bank board
e. Not reviewed
f. Other (please describe below)
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-8
Appendix A FDIC Overdraft Survey Instrument
II. Program Details
(1) (2) (3) (4) (5)
Non-
Automated
Automated Non-
Automated Non- Promoted
Linked Promoted Promoted Ad Hoc
Transfer Lines of Overdraft Overdraft Overdraft
Accounts Credit Protection Protection Protection
Complete this section if you answered “Yes” for Question:
B. Monitoring IA1 IA2 IA3 IA4 IA5
1. Does the institution maintain customer-level information
about usage, and fees and interest accrued under the
particular overdraft program?
1 = Yes, 2 = No
2. How many times in 2006 did senior management evaluate
the program, including items such as reviewing overdraft
activity, heavy usage, income and losses?
3. What best describes how the institution monitors and eval-
uates the performance of the program? (Mark each that
applies.)
a. Vendor provides reports
b. Self evaluation
c. Hire consultant to conduct evaluation
d. Do not regularly evaluate
e. Other (please describe below)
4. Does the institution monitor the program for extensive
usage?
1 = Yes, 2 = No
4.1 If yes, please describe.
5. In 2006, did the institution NOT cover an NSF item for a
customer in good standing, where there were sufficient funds
within the institution’s policy limits?
6. In 2006, how many complaints were received by the institu-
tion for the particular program?
7. Does the institution do any special monitoring of NSF/
Overdraft fees and activity for individual accounts largely
funded by fixed, non-attachable income such as Social Secu-
rity and VA payments?
1 = Yes, 2 = No
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-9
Appendix A FDIC Overdraft Survey Instrument
II. Program Details
(1) (2) (3) (4) (5)
Non-
Automated
Automated Non-
Automated Non- Promoted
Linked Promoted Promoted Ad Hoc
Transfer Lines of Overdraft Overdraft Overdraft
Accounts Credit Protection Protection Protection
Complete this section if you answered “Yes” for Question:
C. Information Provided to Consumers IA1 IA2 IA3 IA4 IA5
1. When does the institution inform its customers of the
program? (Mark each that applies.)
a. When account is opened
b. Periodically with account updates
c. When asked by customer
d. Do not inform customers
e. Other (please describe below)
2. What are the primary means by which customers are
informed of the features of the program? (Mark each that
applies.)
a. Deposit account agreement
b. Brochure about accounts
c. Bank personnel informs customer
d. Letter or special mailing to customer
e. Do not inform customers
f. Other (please describe below)
3. Which features are customers informed of when they enroll
or are included in the program? (Mark each that applies.)
a. The schedule of fees charged
b. APR
c. Which transactions are covered
d. How transactions are processed in determining
account balances and fees charged
e. The available dollar limit covered
f. Other (please describe below)
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-10
Appendix A FDIC Overdraft Survey Instrument
II. Program Details
(1) (2) (3) (4) (5)
Non-
Automated
Automated Non-
Automated Non- Promoted
Linked Promoted Promoted Ad Hoc
Transfer Lines of Overdraft Overdraft Overdraft
Accounts Credit Protection Protection Protection
Complete this section if you answered “Yes” for Question:
C. Information Provided to Consumers, con’t IA1 IA2 IA3 IA4 IA5
4. Do balances provided at proprietary ATM’s show the over-
draft coverage limit?
1 = No, the overdraft limit is not shown in any ATM balance
2 = Yes, the overdraft limit is included in the only balance
shown
3 = Yes, the overdraft limit is shown but listed separately
from the actual balance
5. Do balances provided at non-proprietary ATM’s show the
overdraft coverage limit?
1 = No, the overdraft limit is not shown in any ATM balance
2 = Yes, the overdraft limit is included in the only balance
shown
3 = Yes, the overdraft limit is shown but listed separately
from the actual balance
4 = Do not know
6. When an ATM transaction results in an NSF, when is the
customer notified?
1 = At the time of the transaction, prior to completion of the
transaction
2 = At the time of the transaction, after the completion of the
transaction
3 = Subsequent to the time of transaction (e.g. via customer
notification such as mail or email)
4 = Other (please describe below)
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-11
Appendix A FDIC Overdraft Survey Instrument
II. Program Details
(1) (2) (3) (4) (5)
Non-
Automated
Automated Non-
Automated Non- Promoted
Linked Promoted Promoted Ad Hoc
Transfer Lines of Overdraft Overdraft Overdraft
Accounts Credit Protection Protection Protection
Complete this section if you answered “Yes” for Question:
C. Information Provided to Consumers, con’t IA1 IA2 IA3 IA4 IA5
7. When a POS transaction results in an NSF, when is the
customer notified?
1 = At the time of the transaction, prior to completion of the
transaction
2 = At the time of the transaction, after the completion of the
transaction
3 = Subsequent to the time of transaction (e.g. via customer
notification such as mail or email)
4 = Other (please describe below)
8. In 2006, how many times did the institution advertise in
newspapers, radio, or television?
8.1 If the institution had print, radio, or television advertise-
ments, how many featured the program?
8.2 Of these advertisements which featured the program, how
many were primarily to promote the program or prominently
featured the program?
9. In 2006, of all the institution’s customer mailings (including
emails), how many primarily or prominently featured the
program?
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-12
Appendix A FDIC Overdraft Survey Instrument
II. Program Details
(1) (2) (3) (4) (5)
Non-
Automated
Automated Non-
Automated Non- Promoted
Linked Promoted Promoted Ad Hoc
Transfer Lines of Overdraft Overdraft Overdraft
Accounts Credit Protection Protection Protection
Complete this section if you answered “Yes” for Question:
D. Fees IA1 IA2 IA3 IA4 IA5
1. What is the initiation fee associated with the program?
(If none enter $0.)
2. What is the maintenance fee to maintain the program?
(If none enter $0.)
2.1 How often is this fee assessed?
1 = Monthly
2 = Yearly
3 = Other
3. How are overdraft items charged?
1 = Per item
2 = Per daily occurrence
3 = No per item or daily occurrence fee charged
4 = Other (please describe below)
4. Fees and interest charged:
4.1 For the institution’s linked accounts and lines of credit
programs, what is the fee to transfer or advance funds?
4.2 For the institution’s lines of credit program, what is the
typical APR on the outstanding balance?
4.3 What is the highest fee charged to PAY an NSF item?
4.4 What is the highest fee charged to RETURN an NSF item?
5. Does the per item/occurrence fee change with the number
of items/occurrences with insufficient funds?
1 = Yes, 2 = No
5.1 If yes, please describe the program’s fee schedule.
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-13
Appendix A FDIC Overdraft Survey Instrument
II. Program Details
(1) (2) (3) (4) (5)
Non-
Automated
Automated Non-
Automated Non- Promoted
Linked Promoted Promoted Ad Hoc
Transfer Lines of Overdraft Overdraft Overdraft
Accounts Credit Protection Protection Protection
Complete this section if you answered “Yes” for Question:
D. Fees, con’t IA1 IA2 IA3 IA4 IA5
6. How are overdraft funds typically transferred/advanced?
1 = As needed to meet overdrafts
2 = As needed with a minimum draw
3 = Round lots
4 = Other
6.1 If “Round lots” was chosen, in what denomination are the
round lots? (e.g. $50, $100)
7. Once an account is overdrawn, are additional fees or inter-
est assessed subsequent to regular per item/per occurrence
fees for being in overdraft status?
1 = Yes, 2 = No
7.1 If yes, please describe.
7.2 If yes, what is the grace period before the additional fees
are charged, in days?
8. In the context of fees, does the institution define days by:
1 = Business Days, 2 = Calendar Days
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-14
Appendix A FDIC Overdraft Survey Instrument
II. Program Details
(1) (2) (3) (4) (5)
Non-
Automated Automated
Automated Non- Non-
Linked Promoted Promoted Promoted Ad
Transfer Overdraft Overdraft Hoc Overdraft
Accounts Lines of Credit Protection Protection Protection
Complete this section if you answered “Yes” for Question:
E. Account Coverage IA1 IA2 IA3 IA4 IA5
1. For which of the following accounts is the
program offered? (Mark each that applies.)
a. Checking
b. Money Market
c. NOW
d. Savings
2. Which transactions are covered by the
program in the event of an overdraft?
a. Paper checks/Equivalents
b. ATM withdrawals
c. Debit cards/POS
d. Electronic billpay
e. Automated debit
f. ACH
g. Other (please describe below)
3. Is the program:
1 = Completely Opt-in
2 = Completely Opt-out
3 = Other (please describe below)
4. In 2006:
4.1 How many accounts opted in to the program?
4.2 How many accounts opted out of the
program?
5. What rules/procedures are used to determine
whether a customer qualifies for the program?
(Mark each that applies.)
a. Credit check
b. Minimum balance
c. Age of account
d. History with institution
e. Recurring deposit (e.g. direct deposit)
f. Other (please describe below)
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-15
Appendix A FDIC Overdraft Survey Instrument
II. Program Details
(1) (2) (3) (4) (5)
Non-
Automated Automated
Automated Non- Non-
Linked Promoted Promoted Promoted Ad
Transfer Lines of Overdraft Overdraft Hoc Overdraft
Accounts Credit Protection Protection Protection
Complete this section if you answered “Yes” for Question:
F. Vendor IA1 IA2 IA3 IA4 IA5
1. Is the institution’s current overdraft program
implemented/managed by a vendor or other third
party?
1 = Yes, 2 = No
If the answer to Question 1 is “Yes,” please answer the following vendor-related questions below.
2. How long has the institution used a vendor-
supplied program, in months (MM)?
3. What was the original term of the institution’s
current contract with the vendor, in months (MM)?
4. Which of the following best describes the insti-
tution’s program?
1 = A standardized program obtained from a
vendor (off-the-shelf)
2 = A customized program obtained from a
vendor where the institution sets the
program’s parameters
3 = Other (please describe below)
5. Did the institution first establish or expand its
overdraft protection program with the adoption of a
vendor program?
1 = Yes, 2 = No
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-16
Appendix A FDIC Overdraft Survey Instrument
II. Program Details
(1) (2) (3) (4) (5)
Non-
Automated Automated
Automated Non- Non-
Linked Promoted Promoted Promoted Ad
Transfer Lines of Overdraft Overdraft Hoc Overdraft
Accounts Credit Protection Protection Protection
Complete this section if you answered “Yes” for Question:
F. Vendors, con’t IA1 IA2 IA3 IA4 IA5
6. Which vendor does the institution currently use?
1 = Allied Solutions Group Inc.
2 = Fiserv Inc
3 = Impact Financial Services
4 = Jack Henry
5 = John M. Floyd & Associates
6 = MEA Financial Services
7 = Moebs $ervices Inc.
8 = Pinnacle Financial Strategies
9 = Strunk & Associates L.P.
10 = Other (please list below)
7. Does the vendor receive a percentage of
income/fees generated by the product?
1 = Yes, 2 = No
7.1 If yes, in 2006, what share of fees (in %, e.g. 15,
25) from the institution’s overdraft protection
program was the vendor paid?
8. Does the vendor’s compensation depend on a
minimum level of usage by bank customers?
1 = Yes, 2 = No
8.1 If yes, please describe.
9. Does the vendor’s compensation depend on
features of the program such as its fee structure or
how transactions are cleared?
1 = Yes, 2 = No
9.1 If yes, please describe.
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-17
Appendix A FDIC Overdraft Survey Instrument
Comments
The space below is provided for any additional comments the institution may desire to make
regarding its overdraft protection policies, programs and practices.
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 A-18
Appendix B
Micro-Level Data Request
Customer/Transactions Level Data Request
Table of Contents
Page
Download Descriptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
Download Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
Program Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
I. Download I: Customer/Account List
A. Fields Requested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
II. Download II: NSF Transactions File
Automated Promoted, Automated Non-Promoted, and Ad Hoc Overdraft Programs Only
A. Fields Requested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
B. Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Public Burden Statement
It is estimated that completing this form, including reviewing the instructions and gathering the data needed,
takes an average of 80 hours. Send comments regarding this burden estimate or any other aspect of this collec-
tion of information, including suggestions for reducing this burden to the Paper Reduction Act Clearance Officer,
Legal Division, Federal Deposit Insurance Corporation, 550 17th Street, N.W., Washington, D.C. 20429. An agency
may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it
displays a currently valid OMB control number. This form is OMB control number 3064-0155.
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 B-1
Appendix B Micro-Level Data Request
Download Descriptions
The customer level data request consists of two separate downloads. They are:
Download I: Customer/Account List
A complete listing of all of the customers for the institution’s transactions (e.g. checking, money market, etc.)
and savings accounts, for 2006 or for the time period of the NSF transactions file (described below), whichever
time period is more appropriate. The listing should identify customers using an anonymous customer ID number
(field 2). This number should be unique to each individual holding an account or multiple accounts within the
institution. The account ID (field 3) need only be unique for each of a particular customer’s accounts. For exam-
ple, Mr. John Doe may have three separate accounts within the institution. His unique ID could be “1” and his
accounts could be numbered “1,” “2,” and “3.” Ms. Jane Doe with two accounts within the institution could
have a unique ID of “2” and her accounts numbered “1,” and “2.” No other customers of the institution,
however, should have the ID’s of “1” or “2.”
Download II: NSF Transactions File
Automated Promoted, Automated Non-Promoted, and Ad Hoc Overdraft Programs Only
A complete listing of NSF transactions paid or returned under the institution’s automated promoted, automated
nonpromoted, or ad hoc overdraft protection programs, for the customer/accounts listed in Download I, for
calendar year 2006 or for the most recent complete 12 calendar month period, whichever is more readily avail-
able. Note that if an account had no NSF activity covered under any of these three programs during the relevant
twelve month period, then the account will not appear in the Download II NSF transactions file, even though it
would be included in the “customer/account” Download I data file. Each NSF item should appear as a unique
record in the transactions file. The NSF activity for a specific customer and account will be linked to the Down-
load I “customer/account” file using the anonymous customer ID number and the account ID number.
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 B-2
Appendix B Micro-Level Data Request
Download Instructions
1. File Naming Conventions
Download I: cust_cert_surveydate
Download II: nsf_cert_survey date
Where “cust” and “nsf” are characters as is, “cert” is the institution’s FDIC certificate number, and “survey-
date” is the date Survey II was completed by the institution (YYYYMMDD). The three terms should be separated
by underscores “_”. For example, an institution’s Customer List may be named “cust_99999_20060131.”
2. Variable Naming
For the two data download files, please include a header row with the variable names that we provide in the
following “Fields Requested.”
3. File Format
Please provide the files in comma-delimited “.csv” format, with text fields surrounded by quotes.
4. Media Format
The files should be transferred to FDIC using one of two methods. The institution can use FDIC Connect to
securely transmit files sizes of up to 100MB. For institutions with larger files or who do not have access to FDIC
Connect, please provide the files on a CD or DVD media. If necessary due to large file sizes, the files may be
zipped and saved on multiple CD’s. In this case, please use an arbitrary but natural break to separate the disks,
for example, by months or by region of activity.
If the data are encrypted, please provide the name of the appropriate contact person and his/her contact tele-
phone number and email address, in order for the FDIC to obtain the necessary password to decrypt the data.
Please retain a back-up copy of the data provided to the FDIC, in the event that the original data are lost in
transit.
5. Shipping Directions
Please ship the data overnight to:
The Federal Deposit Insurance Corporation
3501 Fairfax Drive
Arlington, VA 22226
Attn: P. Cashman
F6028, 202.898.6534
Please mark the envelope “Media Enclosed - Do Not X-Ray.”
6. Survey Guidance
Please note that the FDIC will be conducting weekly conference calls to brief institutions on how to complete
the Overdraft Proctection Survey II downloads before they begin their data collection processes. This will be an
opportunity to ask general questions and hear the questions that other institutions may have. Subsequent to the
general conference call, insitutions will have the opportunity to call in and receive one-on-one guidance for
issues and questions that are particular to the institution.
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 B-3
Appendix B Micro-Level Data Request
Program Definitions
(1) Linked Transfer Accounts
A contractual agreement between a bank and a customer, linking the customer’s transactions account with other
accounts within the bank, including savings and credit card accounts. In the event of an overdraft, the bank will
fulfill the customer’s obligations by transferring funds from the customer’s other accounts that are linked to his
transactions account.
(2) Overdraft Lines of Credit
A contractual agreement between a bank and a customer that the bank is willing to lend up to a specified amount
over a specified future period to cover overdrafted items. For the purposes of this Survey, these programs DO
NOT include line of credit programs that do not specifically cover overdrafted items, for example, home equity
lines of credit. The bank extends the line of credit after reviewing a customer using standard underwriting
criteria; the line is considered a loan and requires standard Truth-in-Lending (Regulation Z) disclosures.
(3) Automated Promoted Overdraft Protection
A program or policy where a bank generally honors a customer’s overdrafted obligations, and customers ARE
informed of the existence of the overdraft protection program. The program is uniformly offered to qualifying
customers. Excluded are all overdraft programs where an APR is required. The program is automated in the
sense that standardized procedures or a “matrix” is used to determine whether the NSF item qualifies for the
overdraft protection. Automated programs are typically, but not necessarily, computerized.
(4) Automated Non-Promoted Overdraft Protection
A program or policy where a bank generally honors a customer’s overdrafted obligations; however, customers
are NOT informed of the existence of the overdraft protection program. The program is automated in the sense
that standardized procedures or a “matrix” is used to determine whether the NSF item qualifies for the overdraft
protection. Automated programs are typically, but not necessarily, computerized.
(5) Non-Automated Non-Promoted Ad Hoc Overdraft Protection
These include truly incidental and discretionary accommodations to customers by banks to honor overdrafted
items. These decisions are made independent of or override the programs described in (1) through (4).
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 B-4
Appendix B Micro-Level Data Request
Table IA
Download I: Customer/Account List
Fields Requested
Field Field
Section Number Name Field Description
FDIC Certificate Number
1 cert
This value should be the same for every record for the institution.
Unique Anonymous Customer ID
A customer ID, unique to each customer within the institution. Other individuals on the
2 cust_id Customer List should NOT have the same value as another customer. Depending on the
number of accounts the customer has within the institution, there may be multiple records for
the same cust_id.
Account ID
3 acct_id An account ID, unique to each account held by customer. The numbering convention may
repeat across customers.
Customer City
Institution
4 cust_cit City name of the customer’s address. Do not include any commas; however city names with
& Customer
Identifiers more than one term may be spaced. (For example: Salt Lake City)
Customer State
5 cust_st
2 letter state postal abbreviation of the customer’s address. (For example, for California: CA)
Customer 9 Digit Zip Code (XXXXXXXXX)
6 cust_zip 9 digit postal zip code of the customer’s address, with 5 digit prefix and 4 digit suffix.
(For example: 112381234). This variable MUST be provided in the complete 9-digit format.
Year of Birth (YYYY)
4 digit year of customer’s birth. (For example: 1965) Note: In cases of accounts with multiple
account holders, only one instance of the account should be reported, and the birth year of
7 cust_yob
only one account holder reported. In these instances, list the year of birth of the primary or
first listed account holder. Typically, this is the individual for which the institution has a
Social Security or Tax ID number.
Date Account Opened
(YYYYMMDD) 8 digitdate of when the customer’s account was opened. Begin with year, then
8 acct_dat
month, then day, including any leading zeroes. (For example, January 1, 1990 would be:
19900101)
Account Type Choose
Choose one of the following 1 digit codes to indicate the type of deposit account:
1 = Checking
9 acct_typ 2 = Money Market
Account 3 = NOW
Profile 4 = Savings
5 = Other
Account Category
Choose one of the following 1 digit codes to indicate to which category of customer the
account holder belongs:
10 acct_cat 1 = Consumer
2 = Commercial, Farm, Non-Profit (e.g. churches and schools), or Local, City, State, or
Federal Government
3 = Internal (e.g. official checks)
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 B-5
Appendix B Micro-Level Data Request
Table IA, con’t
Download I: Customer/Account List
Fields Requested
Field Field
Section Number Name Field Description
Special Consumer Accounts
Choose one of the following 1 digit codes to indicate whether the consumer account was
open under a special program that the institution offers:
1 = Special Account for Military
2 = Special Account for Seniors
3 = Special Account for Students
4 = Other 1 (Self Describe)
5 = Other 2 (Self Describe)
11 acct_spc 6 = Other 3 (Self Describe)
7 = Not a Special Account
Note 1: This indicator is solely for the account, not the individual customer. For example, if a
senior opens a regular savings account, then the correct code would be “7.” However, if
Account she opens a savings account which is eligible only to seniors, then the correct code is “2.”
Profile, If an individual in the military has an account which is not a special account offered only to
con’t the military, then the account would also be coded “7” rather than a “1.”
Note 2: If the institution offers other “special” consumer accounts, please use Codes 4, 5,
and 6 and provide a separate listing of what accounts those codes represent.
Social Security Benefits Recipient
Is this account specially denoted as receiving Social Security benefits?
12 acct_ss 1 = Yes
2 = No
3 = Cannot tell
Account Average Balance
For this specific account, the dollar amount of the customer’s annual average balance in
13 acct_bal
2006. Do not include any commas or dollar signs. (For example, an average balance of
$5,613.42 should be entered as: 5613.42.)
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 B-6
Appendix B Micro-Level Data Request
Table IA, con’t
Download I: Customer/Account List
Fields Requested
Field Field
Section Number Name Field Description
Linked Transfer Accounts
Choose one of the following 1 digit codes to indicate if the customer had this type of over-
draft coverage for the particular account:
14 acct_lnk
1 = Yes
2 = No
Note: An account may have more than one type of overdraft coverage.
Lines of Credit
Choose one of the following 1 digit codes to indicate if the customer had this type of over-
draft coverage for the particular account:
15 acct_loc
1 = Yes
2 = No
Overdraft Note: An account may have more than one type of overdraft coverage.
Coverage Automated Promoted Overdraft Protection
Choose one of the following 1 digit codes to indicate if the customer had this type of over-
draft coverage for the particular account:
16 acct_pod
1 = Yes
2 = No
Note: An account may have more than one type of overdraft coverage.
Automated Non-Promoted Overdraft Protection
Choose one of the following 1 digit codes to indicate if the customer had this type of over-
draft coverage for the particular account:
17 acct_np
1 =Yes
2 =No
Note: An account may have more than one type of overdraft coverage.
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 B-7
Appendix B Micro-Level Data Request
Table IB
Download I: Customer/Account List
Example
Institution &
Customer ID’s Customer Profile Account Profile Overdraft Coverage
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17)
cust_ acct_ cust_ cust_ acct_ acct_ acct_ acct_ acct_ acct_ acct_ acct_
cert id id cust_cit st cust_zip yob acct_dat typ cat spc ss acct_bal lnk loc pod np
99999 1 4 Washington DC 200101234 1965 20060331 3 1 2 2 4520.00 2 2 2 2
99999 1 3 Washington DC 200101234 1965 19951221 2 1 1 2 3000.00 2 2 2 2
99999 1 2 Washington DC 200101234 1965 19900101 1 1 1 2 2561.27 1 1 1 2
99999 1 1 Washington DC 200101234 1965 19900101 4 1 1 2 271.22 1 2 2 2
99999 2 2 Indio CA 123455678 1970 19951201 1 2 1 2 1081.31 1 1 1 2
99999 2 1 Indio CA 123455678 1970 19951201 4 2 1 2 352.37 2 2 2 2
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 B-8
Appendix B Micro-Level Data Request
Table IIA
Download II: NSF Transactions File
Automated Promoted, Automated Non-Promoted, and Ad Hoc Overdraft Programs Only
Fields Requested
Field Field
Section Number Name Field Description
FDIC Certificate Number
1 cert
This value should be the same for every record for the institution.
Institution Unique Anonymous Customer ID
2 cust_id
& Customer A customer ID, unique to each customer within the institution.
Identifiers Account ID
3 acct_id An account ID, unique to each account held by customer. Depending on the customer’s level
of NSF activity, there may be multiple records for the same cust_id/acct_id combination.
Date of NSF Item (YYYYMMDD)
4 nsf_date 8 digit date of the NSF item. Begin with year, then month, then day, including any leading
zeroes. (For example, January 1, 2005 would be: 20050101)
Transaction Type
If electronically identifiable, choose one of the following 1 digit codes to indicate for what type
of transaction the NSF activity was related:
1 = Paper checks/Equivalents
2 = ATM withdrawals
5 tran_typ
3 = Debit cards/POS
4 = Electronic billpay
5 = Automated debit
6 = ACH
7 = Other
NSF Decision
Choose one of the following 1 digit codes to indicate whether the NSF item was paid or
6 nsf_dec returned by the institution:
1 = Paid NSF
2 = Returned NSF
Overdraft Paid Under This Overdraft Program
Activity Choose one of the following 1 digit codes to indicate under what overdraft program the NSF
item was paid:
1 = Automated Promoted or Automated Non-Promoted Overdraft
7 paid_und
2 = Ad Hoc and/or Paid Outside of Program Parameters
3 = NSF Item Not Paid
Note: If the answer for Field Number 6 is “2,” the NSF item was returned, then the answer to
Field Number 7 should always be “3,” the NSF item was not paid.
Applicable Fee for NSF Item
The dollar amount of the fee applicable for the NSF item. This is the dollar amount of the fee
8 nsf_fee
that should apply to this NSF. Do not include any commas or dollar signs. (For example, a fee
of $20.50 should be entered as: 20.50)
NSF Fee Waivers
Choose one of the following 1 digit codes to indicate whether any fee was waived or refunded
9 nsf_waiv in relation to the NSF item:
1 = Fee Waived or Refunded
2 = Fee Not Waived nor Refunded
$ Amount of NSF Item
10 nsf_amt The dollar amount of the NSF item. Do not include any commas or dollar signs. (For example,
an NSF item of $213.12 should be entered as: 213.12)
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 B-9
Appendix B Micro-Level Data Request
Table IIB
Download II: NSF Transactions File
Automated Promoted, Automated Non-Promoted, and Ad Hoc Overdraft Programs
Example
Institution & Customer ID’s Overdraft Activity
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
cert cust_id acct_id nsf_date tran_typ nsf_dec paid_und nsf_fee nsf_waiv nsf_amt
99999 1 2 20050101 1 1 1 20.00 2 20.36
99999 1 2 20050102 2 1 1 20.00 2 100.00
99999 1 2 20050103 1 1 2 20.00 2 151.20
99999 1 2 20050104 5 2 3 20.00 1 50.00
99999 2 1 20051201 3 1 1 20.00 2 200.00
99999 2 2 20051201 1 2 3 20.00 2 1000.00
FDIC STUDY OF BANK OVERDRAFT PROGRAMS I NOVEMBER 2008 B-10